Chinese electric vehicle maker Nio has launched a follow-on share offering in the US market, its second in as many months, to capitalise on improved investor sentiment surrounding the sector.
The firm is offering 75 million new American depositary shares (ADS) with an option for underwriters to sell an additional 11.25 million ADS to meet demand, according to its US exchange filing. Bookrunners of the deal are Bank of America, CICC and Morgan Stanley.
The Shanghai-based start-up made its US stock debut in 2018 and raised an additional US$428.4 million cash from a follow-on sale in June at US$5.95 per share. The stock has since surged to US$19.88 on Thursday, a level that could help the firm raise between US$1.5 billion and US$1.7 billion.
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The move to tap new capital has come on the heels of the successful initial public offering and debut by rival Xpeng, whose shares closed for a 41 per cent premium on their New York debut overnight. Xpeng was able to bump up its IPO price higher due to strong investors’ demand.
Nio has decided to tap the market again on the back of momentum in Nio’s business development and investors’ demand, its spokesman said in response to an email query from the South China Morning Post.
“Nio is seizing current opportunities to further enhance cash reserves through the follow-on offering,” he said.
Hong Kong and mainland China are competing fiercely to attract Chinese entrepreneurs to list on their stock exchanges. At the same time, US-China tensions have spurred many of them to seek a listing closer to home.
However, the United States is still home to the world’s largest financial markets and Chinese new economy companies often benchmark themselves against US peers as well as find the most knowledgeable analysts and investors in New York.
“We have no monopoly … every market has their unique attractiveness,” said Charles Li, head of the Hong Kong stock exchange on Friday during a South China Morning Post webinar.
The rally in Chinese EV stocks underscores optimism surrounding a growing list of start-ups that aimed to overtake market leader Tesla in China, as the world’s biggest car market starts rebounding from the coronavirus-led slump. Tesla, which has a manufacturing base in China and sells its Model 3 in the country, has surged over five times to US$2,238.75 in New York.
Li added that the rise in Tesla’s value clearly shows that investors’ believe smart electric vehicles will one day change the way people live.
China Evergrande billionaire takes early losses in plans to overtake Tesla, dominate global electric car market
While sales have slowed this year amid the Covid-19 outbreak, in July there was an early sign of recovery as sales of new energy vehicle ended 12 straight months of decline and rose 19.3 per cent year-on-year to 98,000 units, according to China Association of Automobile Manufacturers.
Sales of EV cars are expected to triple by 2025, from an expected 1.1 million this year, the association forecasts.
“China’s new energy vehicle deliveries are likely to resume rising in the second half, driven by an increase in high-end electric vehicle launches by joint venture brands, and Chinese automakers’ promotions for low-end electric vehicles in rural areas with regulatory support,” wrote Fitch analysts including Jing Yang and Tyran Kam in a recent report.
Nio plans to use the proceeds raised in part to boost its stake in Nio China and for research and development.
Nio China was formed in April after three Chinese strategic investors invested 7 billion yuan (US$1 billion). In return, Nio injected its core businesses and assets in China, including vehicle research and development, supply chain, sales and services into Nio China.
These three investors, which include Hefei City Construction and Investment Holding, CMG-SDIC Capital and Anhui Provincial Emerging Industry Investment, together hold 24.1 per cent stake in Nio China, and Nio holds a controlling 75.9 per cent.
Backed by Tencent, Nio’s latest follow-on share sale came after the Shanghai start-up reported in August its first quarterly gross profit since it was founded in 2014. During the second quarter, it said it delivered 10,331 vehicles, up three times from the same period a year ago. These include its models ES6, a five-seater electric sport utility vehicle (SUV), and ES8, a six-seater and seven-seater electric SUV.
Additional reporting by Alison Tudor-Ackroyd
More from South China Morning Post:
- China’s Tesla challenger Xpeng said to be preparing for US listing as country’s EV industry fights slowdown
- Loss-making Chinese Tesla rival Nio expands new American depositary shares sale, raises US$428 million on strong demand
- China Evergrande billionaire takes early losses in plans to overtake Tesla, dominate global electric car market
- Tesla’s Chinese competitor Xpeng completes debut with 41 per cent premium after upsizing IPO to US$1.5 billion
- Chinese Tesla challenger Nio reports first gross profit since founding in 2014