A NextEV Inc. Nio EP9 self-driving concept electric vehicle (EV) stands on display at the Auto Shanghai 2017 vehicle show in Shanghai, China. Photographer: Qilai Shen/Bloomberg

Tencent-Backed EV Maker Seeks Valuation Above $8 Billion in IPO

(Bloomberg) -- NIO Inc., the Chinese electric-car maker backed by Tencent Holdings Ltd., is planning a U.S. initial public offering that would give it a valuation topping $8 billion as it gears up to take on the likes of Tesla Inc.

The company is aiming to raise as much as $1.3 billion, offering 160 million American depositary shares at $6.25 to $8.25 each, according to a regulatory filing Tuesday in the U.S. That would give the company a market capitalization of about $6.4 billion to $8.5 billion.

NIO is among Chinese electric-car companies raising money to fund aggressive product development and expansion amid the auto industry’s seismic shift toward alternative-power and autonomous vehicles. China’s government is also pushing to increase the use of battery-powered cars to cut pollution and reduce dependence on imported oil, spawning a clutch of startups in the nation aiming to take on Tesla and legacy carmakers.

NIO plans to use proceeds from the offering for research and development, sales and marketing, and building manufacturing facilities and the supply chain, the company said in the filing.

Shares are expected to price on Sept. 11 following a roadshow that starts Wednesday in Hong Kong, according to terms for the deal obtained by Bloomberg.

Concentrated Power

The offering has been structured to ensure voting rights remain concentrated with founder William Li and technology company Tencent. After the IPO, Li will own 14.5 percent of the electric-car maker and have 48.3 percent of the voting power through Class C shares. The Class B stock owned by Tencent and related entities after the offering will represent 12.9 percent of NIO and 21.5 percent of the voting power, according to the prospectus.

As much as 5 percent of the ADS, each representing one Class A share, has been reserved for directors, officers, employees and other individuals associated with company, it said. Including an overallotment option, the IPO could raise as much as $1.5 billion.

After meeting investors in Hong Kong on Wednesday and Thursday, the NIO management will be in Singapore Friday, according to the deal terms. The roadshow will continue next month in London and the U.S.

NIO’s move for the U.S. listing comes amid Tesla’s plan to set up a gigafactory in Shanghai. The U.S. company, which has a market capitalization of $53 billion, is among foreign carmakers trying to make inroads in the world’s biggest electric-vehicle market.

NIO, formerly known as NextEV, is one of several startups to have sprouted in China after the government introduced incentives. In January, Byton, a Nanjing-based company started by former BMW AG executives, became the first Chinese automaker to hold a large-scale unveiling at the Consumer Electronics Show in Las Vegas. Others like WM Motor Technology Co. and XPeng Motors, backed by funding from Alibaba Group Holding Ltd., are also developing new models.

First Vehicle

NIO’s founder Li, also known as Li Bin, plans to transfer 50 million shares, accounting for about one-third of stock he owns in the company, to a trust at an “appropriate time in the future,” he said in a letter included in the prospectus. Li will retain voting rights to the stock, while NIO users will discuss and propose how to use “economic benefits from these shares, through certain mechanisms to be implemented in the future,” he said.

NIO began selling its first vehicle, the ES8 sport utility vehicle, in December, about three years after the company was founded, and deliveries started on June 28 this year. The vehicle is priced at 448,000 yuan ($66,000) before subsidies.

As of Aug. 28, NIO had delivered more than 1,300 ES8s and had reservations for another 15,700 more, according to the prospectus. The company plans to begin selling another electric SUV, the ES6, by the end of 2018, with initial deliveries in the first half of 2019.

Morgan Stanley, Goldman Sachs Group Inc. and JP Morgan Chase & Co. are arranging the offering, along with Bank of America Corp., Deutsche Bank AG, Citigroup Inc., Credit Suisse Group AG, UBS Group AG and Wolfe Capital.

©2018 Bloomberg L.P.