NIO raises $2.65 bn

15 December 2020
2 min.
NIO raises $2.65 bn

NIO shares

NIO took advantage of a 919% increase over the year to raise $2.65bn by selling 68m ADSs, more than originally planned, but at a 7.1% discount to Friday's closing price. Here's what that means for the company and investors.

Chinese electric vehicle maker NIO (NIO) on Monday re-issued 68 million American Depositary Receipts (ADSs) each representing one class A common share in the company.

The offer price was $39 per share, representing a 7.1% discount from Friday's closing price and an 18% discount from the 20-day moving average price. As a result, NIO raised $2.65bn in investment.

NIO shares, which had posted an incredible 919.4% gain since the beginning of the year, were down 2.38% on Monday, extending last month's loss to -15.16%.

The discount in the sale of a large NIO stake (68 million that's about 6% of the total outstanding shares) is not unusual. A secondary placement of shares at such an increase in price is quite reasonable, this way NIO "cashes in" on its growth and uses the money raised for development. In addition, it is common practice and NIO already sold secondary shares in August at $17.

According to NIO's press release, the company plans to use the net proceeds from the ADS offering primarily for research and development of new next-generation autonomous driving products and technologies, expansion of its sales and service network and market penetration and general corporate purposes.

This is good for both NIO's future and its long-term investors.

In November, NIO reported 146% revenue growth and a 2.5 times increase in electric vehicle deliveries compared to last year's figures. Experts estimates

Goldman Sachs analysts gave NIO stock a "hold" rating and a $59 target price, up 44% from Monday's closing price of $40.98. The electric car maker's offer has been increased from 60 million shares to 68 million meaning that the underwriters have decided to buy additional NIO shares over and above the original target amount. Thus, after the offer increase, NIO underwriters Morgan Stanley and China International Capital Corporation were able to purchase up to 10.2 million additional shares.

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