Chinese electric vehicle manufacturer Nio is aiming to raise around $344.2 million through the sales of additional American depositary receipts (ADRs) in New York. The company announced that it will be issuing up to 60 million ADRs, marking its first offering of new shares since its US debut back in September 2018.
The figure the company is aiming to raise is based on its share's closing price on Monday, which closed at $5.97 per share. According to the cash-strapped company's prospectus, the proceeds of the new share sale will be used to fund its expansion strategy and its continued research and development.
NIO could potentially raise even more money if the demand from investors for its ADRs remains high. Underwriters can utilize an overallotment option that will allow them to buy nine million additional ADRs within a 30-day period. Acting as bookrunners for the share sale are Morgan Stanley, CICC, and Credit Suisse.
Actual prices for NIO's ADRs are expected to be announced after the market closes on Wednesday in New York. The ADRs that will be made available to investors work out to be roughly 7 percent of its existing share capital as of Tuesday's closing. NIO mentioned in its prospectus that Tencent, one of its largest shareholders, has committed to buying $10 million worth of its ADRs.
The listing of new shares comes just two months after NIO managed to get a $1 billion injections from a number of Chinese investors. The deal, which involved Chinese firms Anhui Provincial Emerging Industry Investment, Hefei City Construction and Investment Holdings, and CMG-SDIC Capital, included the establishment of a new company called NIO China.
Under the deal, the three companies will together own a 24.1 percent stake in NIO China. The transaction is expected to be completed by the end of the second quarter this year. After the deal was announced, NIO had stated that it should have enough liquidity to support its business strategy. However, in its latest prospectus, NIO revealed that it will be receiving only half of the cash injection by the end of June as a first installment.
Raising additional capital to bolster is business is critical for NIO as it continues to face tougher competition in its home market, particularly from Tesla. The company's business had also been greatly affected by the disruptions caused by the coronavirus pandemic. For its first quarter, NIO had reported a net loss of 1.72 billion yuan, a slight improvement from the 2.65 billion net loss it reported over the same period last year.
