NIOfrom (NYSE: NIO) The action opened lower on Friday, after the Chinese electric vehicle maker said it would issue at least 60 million shares in a new offering next week.
As of 10:30 a.m. EST, shares of NIO’s U.S. custodian were down about 4.9% from Thursday’s closing price.
NIO has said it will sell up to 69 million new U.S. depositary shares, raising up to $ 2.8 billion, in an offer expected to hit the market next week. The company plans to use the new cash for a variety of business purposes, including the development of new products, the development of autonomous driving technologies and to expand its sales and service network.
NIO definitely plans to sell 60 million shares. Its underwriters, including Morgan Stanley, have the right to purchase an additional 9 million shares within 30 days.
NIO’s offer follows similar secondary share offerings from competitors, including Tesla, which announced a $ 5 billion increase earlier this week; Li Auto, which raised about $ 1.3 billion last week; and XPeng, which on Wednesday announced a stock sale of $ 2.2 billion.
NIO’s stock likely traded lower after the news due to investor concerns about the dilutive effect of 60 million (or maybe more) new stock.
Auto investors need to be clear on this: NIO – like its rivals – does not have an urgent need for cash. It’s a very different situation than at the start of this year, when NIO urgently sought additional investment at a time when it was on the verge of bankruptcy.
The company is now in good financial shape, with or without that extra $ 2.8 billion, but the idea – and I think it’s a wise reflection – is probably that it’s probably not a bad idea to raise additional cash at a time when investors are breaking up rising electric vehicle stocks.
The price of the offer is expected Monday.