NIO’s $100 Million Fundraise Falls Short for Cash-Needy Carmaker
NIO Keeps Seeking Cash to Supplement $100 Million Note Sales
(Bloomberg) -- Shares of NIO Inc. slumped after the electric-vehicle maker announced it’s issuing convertible notes that it expects to raise $100 million, a sum that won’t be sufficient to address its cash needs.
The Chinese carmaker will sell $70 million of notes to one unidentified Asian investment fund through a private placement that should close around Feb. 10, according to a statement. NIO disclosed a similar transaction in January with another unaffiliated fund.
NIO’s U.S.-listed stock fell 7.1% on concerns the amount of money coming in from the sales won’t nearly be enough. Exorbitant spending on marketing and splashy showrooms hasn’t spurred enough demand for of NIO’s ES8 and ES6 electric sport utility vehicles. And now China’s auto market -- already struggling with weaker demand and less-generous EV subsidies -- is reeling from the coronavirus that has idled factories and stores.
“NIO’s inability to attract significant new financing will remain a concern for investors,” said Robin Zhu, a Sanford C. Bernstein analyst who rates the stock the equivalent of a sell. “Its shares likely benefited from Tesla’s sharp rise in recent weeks, but the company’s balance sheet remains in precarious shape.”
The notes NIO is issuing will mature in February 2021. Their $3.07 initial conversion price represents a 25% discount relative to Thursday’s closing price of $4.08.
NIO has accumulated about $6 billion in losses since it was founded by chief executive officer William Li in 2014. Its deficit in the quarter that ended in September was $324.9 million. The company ended the period with 1.96 billion yuan ($274.3 million) in cash and equivalents and said it didn’t have enough money to continue operating another 12 months.
To contact Bloomberg News staff for this story: Chunying Zhang in Shanghai at czhang714@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Craig Trudell, David Welch
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With assistance from Bloomberg