High-Flying EV Maker Nio Taps Equity Market Yet Again With 75M Offering

Nio Inc – ADR NIO shares, which have seen strong upside since the launch of its Battery-as-a-Service, are giving back some of the gains.

What Happened: The Shanghai-based EV maker said late Thursday it has commenced an offering of 75 million ADSs, each representing one Class A ordinary share of the company. The company said it has earmarked 11.25 million shares for covering the over-allotment option.

Morgan Stanley, CICC Hong Kong Securities Ltd and BofA Securities are acting as underwriters for the offering.

The company said it plans to use the net proceeds from offering, mainly to increase the share capital of Nio China and its ownership in it, to repurchase equity interests held by certain minority shareholders of NIO China, and for R&D in autonomous driving technologies, global market development and general corporate purposes.

Nio said in April a group of strategic investors agreed to inject 7 billion yuan in cash into Nio China and that the company will transfer its core Chinese businesses and assets valued at 17.77 billion yuan into Nio China, while also investing 4.26 billion yuan in cash.

In late June, the company said strategic investors have completed a substantial portion of the committed cash injections.

Why It's Important: Nio has seen its fundamentals improve, especially after the COVID-19-induced downturn. The company has also managed to beef up its cash reserves by a private placement of debt, investment by strategic investors and an equity offering it completed in mid-June that fetched the company $428.4 million in gross proceeds. The size of the offering was upsized from 60 million to 72 million.

The stock had pulled back about 6% in reaction to the June 9 announcement of Nio's previous equity offering and declined further when the pricing of the offering was announced. Subsequently, the stock recovered to its pre-offering levels only to grind higher in early July following the announcement of deliveries data.

Benzinga's Take: Given the interest surrounding the EV space and Nio's improving fundamentals, the offering is likely to generate interest among investors. With Nio showing intent with renewed thrust on innovation, performance and cost controls and its plans to expand globally, it's only logical that the company is looking to augment its cash resources to fuel further growth.

In pre-market trading Friday, Nio shares were down 5.8% to $18.72.

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