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NIO stock sinks after $1 billion planned convertible debt offering

Up-and-coming Chinese EV maker NIO’s stock is falling after announcing a proposed total of $1 billion in convertible senior notes on Monday.

NIO revealed in an SEC filing it plans to issue two batches of $500 million notes, convertible to American depository shares (ADS) with long-dated maturities in 2029 and 2030.

The EV maker plans to use the funds to “further strengthen its balance sheet as well as for general purposes.” NIO ended the second quarter with nearly $2 billion in cash and equivalents.

On NIO’s second-quarter earnings call in late August, Citi analyst Jeff Chung inquired about the company’s refinancing plan and cash flow projection going forward.

Stanley Qu, senior vice president of finance, responded, “I think as the delivery volume ramp-up from Q3 this year, our operating cash flow will be significantly improved” compared to the first half of the year.

Qu also explained that “both our US dollar and also RMB financing channels remain open.” He added, “And regarding the financing – refinancing plan, we will disclose our plan accordingly if there is any capital market-related updates.”

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NIO second-generation ES6 electric SUV (Source: NIO)

NIO stock falls following proposed fundraising

The fundraising comes shortly after NIO received a $1.1 billion investment from CYVN Holdings in June, an investment firm backed by the Abu Dhabi government. Following the transaction, CYVN owns around 7% of outstanding NIO shares.

NIO’s second-quarter earnings showed falling vehicle deliveries, revenue, and margins as it revamps its lineup to better position itself to compete in the future.

While vehicle deliveries fell 24% (23,520) from the first quarter (31,041), losses swelled by over 119% YOY to $835 million.

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NIO 1-year stock chart (Source: TradingView)

Following the fundraising announcement, NIO stock fell 17% in Tuesday’s trading session. The drop comes after NIO’s shares peaked at $16.18 in early August following a two-month run.

CEO William Li said, “Attributed to the product transition based on the NT2.0 Platform, coupled with the expansion of our power network and the strengthening of our sales capabilities, we expect a solid growth in vehicle deliveries in the second half of 2023.”

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NIO ET5 Touring designed for Europe (Source: NIO)

NIO launched several new models this past quarter expected to help drive sales and expand the brand, including the new ES6, launched in late May, and the ET5 Touring electric station wagon in June. It also launched the new EC6 SUV last week.

The new models helped push NIO’s deliveries up 103% YOY in July, as cumulative deliveries reached 364,579.

Looking ahead, NIO plans to deliver between 55,000 and 57,000 vehicles between July and September, representing an increase of around 74% to 80% YOY.

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