Nio Shares Extend Rally On News Of Potential Financing

Underlining its inherent volatility, Chinese electric vehicle manufacturer Nio Inc – ADR NIO stock is retreating after Wednesday's 14%-plus rally that took the stock to its highest level since mid-2019. 

Nio Funding News Moves Stock 

Nio shares rallied to an intraday high of $4.48 before ending Wednesday's session at $4.29, a gain of 14.10%, on four times their average volume.

The rally was sparked off by a report in Sina Finance that said Guangzhou-based automaker Guangzhou Automobile Group Co Ltd GNZUF is preparing to invest $1 billion in cash-strapped Nio.

GAC confirmed in a communication to the Shanghai stock exchange Thursday that its units and external parties could invest as much as $150 million in Nio.

Nio said in a separate statement that it has explored financing and strategic opportunities and that all commercial discussion remains preliminary and no definitive agreement has been entered into by both parties.

Nio's Funding Needs 

Nio posted a record delivery number for the fourth quarter. Yet the company's precarious cash position has continued to remain an overhang on shares.

As of Sept. 30, the company had cash and cash equivalents of $274.3 million.

For the third quarter alone, the company's operating expenses were $306.06 million.

Nio acknowledged in it third-quarter release that the cash balance is not adequate to provide the required working capital and liquidity for continuous operation in the next 12 months.

The company has been vigorously pursuing cost cuts in a bid to preserve cash.

A firm commitment on funding could be the next positive catalyst for the stock.

Nio shares were trading 2.22% higher at $4.38 at the time of publication Thursday. 

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Photo courtesy of Nio.