Tesla's Top Outside Investor Takes 11% Stake in Challenger NIO

(Bloomberg) -- The largest investor in Tesla Inc. after Elon Musk has taken an 11.4 percent stake in a Chinese company aspiring to become an electric vehicle-making rival.

Baillie Gifford & Co. disclosed that it owns 85.3 million NIO Inc. shares in a regulatory filing Tuesday. The holding was worth about $515 million as of the close of trading Monday. On Tuesday, when news of the stake broke, NIO’s American depositary receipts surged 22 percent.

The investment represents a vote of confidence in the Shanghai-based electric-car maker. NIO, which has its U.S. headquarters in San Jose, California, raised $1 billion in its U.S. initial public offering last month and is ramping up production of the ES8 sport utility vehicle -- its first commercial product.

Musk, 47, is Tesla’s chief executive officer and largest shareholder, with an almost 20 percent stake. He’s followed by Edinburgh-based Baillie Gifford, which owns 7.7 percent of the company, according to data compiled by Bloomberg.

The fund manager isn’t the only major investor that Tesla and NIO share. Another is Tencent Holdings Ltd., which holds 4.9 percent of Tesla and all of a special class of NIO stock, giving the Chinese tech giant about 22 percent voting power of issued shares. Both Tencent and Baillie Gifford invested in NIO as part of a funding round last year.

Tuesday’s gain brings NIO back to positive territory compared with its IPO price of $6.26 a share. The stock has had a volatile start, with investors scrutinizing the company’s manufacturing capabilities and potential to reach profitability. NIO had delivered fewer than 2,000 vehicles ever up until its IPO filing.

NIO is one of a slew of electric-car makers vying to become a homegrown answer to Tesla in China, where government incentives have helped the country become the world’s biggest market for clean-energy vehicles. The company and peers such as Byton and Xpeng Motors Technology Ltd. are racing to win over users before Tesla increases its presence in China and German giants BMW AG and Daimler AG launch more battery-powered cars.

©2018 Bloomberg L.P.