Pedestrians walk past a NIO showroom in Shanghai, China on Monday, April 6, 2020.
Qilai Shen/BloombergNIO is capitalizing on investors’ insatiable demand for EV-related stocks.
The Chinese electric vehicle maker announced Thursday it planned to sell 75 million ADRs, short for American depositary receipts, to raise money, in part, to fund development of its autonomous driving technologies as well as expand globally.
(ADRs are, essentially, stock in foreign companies that trade in the U.S.)
Monday, the company followed up the Thursday announcement it is selling 88.5 million ADRs at $17 a share, an 8% discount to where they closed Friday.
The 8% discount might look a little large to seasoned traders, but NIO (ticker: NIO) shares have been on fire lately, rising 55% in August, as of Friday’s closing price. The average price for NIO stock over the past 20 trading days is less than $15 a share.
NIO stock is off almost 6% in premarket trading to about $17.40 a share. Dow Jones Industrial Average futures, for comparison, are up 0.2%. S&P 500 futures have risen 0.3%.
The sale will bring in about $1.5 billion into NIO coffers. The amount rises to about $1.7 billion if underwriters exercise all their options. NIO, for reference, has about $1.9 billion of debt on its book. NIO’s market capitalization was about $25 billion as of Friday’s closing price.
Many EV makers have been using strong market conditions to raise money. EV stocks Barron’s tracks are up about 300% year to date. Stock in Tesla (TSLA), the EV behemoth, is up about 430% year to date, making it the most valuable car company on the planet.
Li Auto (LI) and Xpeng (XPEV) recently raised billion in initial public offerings and other EV companies are merging with special purpose acquisition companies, or SPACs,
The question for investors is the capital raising a sign of a market top or does it represent an opportunity for EV makers to extend their lead over the traditional industry in battery and autonomous driving technologies.
The bulls will believe the latter. The bears will believe the former.
There are still plenty of EV-skeptics out there. More than one-third of analysts covering Tesla shares rate them Sell. The average Sell-rating ratio for stocks in the Dow is about 8%. About 13% of analysts covering NIO stock rate its shares Sell. About 47% rate shares Buy. The average Buy-rating ratio for stocks in the Dow is about 55%. The Buy-rating ratio for Tesla stock is only 16%.
There are more Sell ratings, and fewer Buy ratings, for EV stocks. Analysts are having trouble keeping up with share price gains and predicting what those gains mean for EV penetration into the traditional auto market in years to come.
Write to Al Root at allen.root@dowjones.com
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August 31, 2020 at 06:52PM
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EV Company Nio Sold Stock at $17. What You Need to Know. - Barron's
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