Nio (NYSE:NIO) made a move last week that is traditionally disliked by investors, and it was one that predictably sent shares tumbling in the aftermath. On September 10, the Chinese EV maker said it intends to raise $1 billion via a new equity offering, with the issuance of 181.8 million Class A ordinary shares (with one ADS representing one Class A share).
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The ADSs (American Depositary Shares) are priced at $5.57 each in the public offering, roughly 2.6% below the September 10 closing price. The company stated that the funds will be used for R&D of core smart EV technologies, the creation of future technology platforms and vehicle models spanning its brands, expansion of its battery swapping and charging network, and other general corporate purposes.
This suggests an 8-9% equity dilution once the transaction is completed, and that is the bit investors are always unhappy about. But while the timing appears a bit iffy, J.P. Morgan analyst Nick Lai believes the raise will serve a good purpose.
“Fund raising should help the company in an extremely competitive EV market in China although the timing of the issuance is somewhat a surprise right after Nio’s recent 2Q25 result release when management highlighted its robust product pipeline and profitability turnaround in 4Q25,” the analyst explained.
By the end of June, NIO held Rmb27 billion in cash and equivalents. Per Lai’s estimate, cash burn/FCF outflow narrowed to about Rmb2 billion in 2Q25, and the analyst expects the company to reach positive free cash flow by Q4. Management has called for Q4 non-GAAP operating profit to break even, driven by strong volume growth and improving margins. Lai points out the Street’s forecast for 4Q25 profit has been revised up from a Rmb1.9 billion loss before the Q2 results to roughly a Rmb1.1 billion loss, compared with J.P. Morgan’s Rmb500 million loss estimate.
“We believe risk to earnings revision would be on the upside,” Lai opined on the issue.
Lai counts some “key catalysts” ahead, including the September 20 Nio Day, where the company will announce the final price of its new premium SUV, the ES8, after what appears to be a strong pre-order response. The Guangzhou Auto Show in November is another potential catalyst, where NIO may unveil the Onvo L80, a five-seater SUV positioned as a high-volume model. Together with upcoming launches under both NIO and Onvo brands, Lau expects sales to reach 488,000 units in FY26, up from 323,000 this year.
“All in all,” Lai summed up, “our positive stance on Nio remains.” Accordingly, Lai assigns NIO shares an Overweight (i.e., Buy) rating and an $8 price target. This target conveys his confidence in NIO’s ability to climb ~29% from current levels. (To watch Lai’s track record, click here)
The rest of the Street’s ratings break down into 6 Buys, 5 Holds, and a single Sell, all coalescing to a Moderate Buy consensus view. However, going by the $6.16 average price target, shares are currently fully valued. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.