Nio, a prominent player in the global smart electric vehicle market, has announced its plans to issue new shares to raise funds following concerns about potential financial stress highlighted in its recent fourth-quarter earnings report. The company intends to issue up to 118,793,300 class A ordinary shares in offshore transactions outside the US to non-US persons.
The primary objective behind this equity placement is to utilize the net proceeds for research and development of smart electric vehicle technologies and new products, bolstering the balance sheet, and addressing general corporate needs. However, Nio has cautioned that there is no guarantee that the equity placement will be completed successfully.
In response to this announcement, the company’s American Depositary Shares (ADS) experienced a 6.64 percent decline in Thursday’s pre-market trading session, with the trading price dropping to $3.94 per share. If the planned share placement is fully executed, Nio stands to raise up to $475 million, assuming a trading price of $4 per share.
Nio has been grappling with challenges related to weak car deliveries in recent months, particularly with the underperformance of the L60 SUV, the first model from its sub-brand Onvo. The company’s financial situation has been under pressure, as highlighted in its fourth-quarter earnings report, where it disclosed that current liabilities exceeded current assets as of December 31, 2024.
Despite these challenges, Nio remains optimistic about its future prospects. The company recently underwent organizational changes and introduced the Cell Business Unit (CBU) management mechanism to enhance operations. Nio’s management has set ambitious goals, aiming to achieve profitability by 2026 and targeting single-quarter profitability by the fourth quarter of 2025.
Nio’s founder, chairman, and CEO, William Li, has reiterated the company’s commitment to achieving profitability through increased sales, maintaining gross margins, and controlling expenses. Li emphasized the importance of financial discipline and prudent capital allocation to pave the way for future profitability.
In a bid to address its financial requirements and propel its growth trajectory, Nio has initiated the proposed new share offering. The company aims to leverage the proceeds from this offering to advance its technological capabilities, expand its product portfolio, and fortify its financial position. This strategic move aligns with Nio’s long-term vision of establishing itself as a key player in the smart electric vehicle market.
As Nio navigates through its current financial challenges, the company remains focused on driving innovation, enhancing operational efficiency, and delivering value to its stakeholders. The proposed equity placement underscores Nio’s commitment to sustainable growth and reinforces its position as a frontrunner in the evolving electric vehicle industry.
