Nio Inc. (NIO) stock plunged nearly 10% after it announced plans to raise over $1 billion through a new equity offering. The Chinese EV maker has priced its offering at $5.57 per ADS, or HK$43.36 per ordinary share, an 11% discount to the previous day’s close. The transaction is expected to close around September 17.
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This move raised concerns about shareholder dilution, as the offering adds roughly 182 million new shares to the market. These shares can be offered either as ADSs or as ordinary shares in Hong Kong and Singapore.
Morgan Stanley (MS), UBS (UBS), and Deutsche Bank (DB) are among the underwriters, with an option to purchase an additional 27.3 million ADS.
Importantly, the offering comes as NIO stock has surged 68% in the past three months. The rally was supported by record August deliveries and growing optimism about its new mass-market brands, Onvo and Firefly.
Proceeds to Support Growth
Nio plans to use the net proceeds from the offering to fund several key initiatives, such as ramping up R&D for smart EV technologies and the launch of new vehicle platforms.
Moreover, Nio is doubling down on battery swapping, a fast, automated alternative to charging. With the funds, the carmaker is looking to expand its battery-swapping and charging network.
Also, the company aims to use the proceeds to strengthen its balance sheet amid rising competition and ongoing losses. The company recently reported a narrowed second-quarter loss of $700.7 million, a slight improvement from the previous quarter and year.
Overall, Nio is betting on long-term growth with this capital raise to support R&D, battery-swapping infrastructure, and new vehicle launches.
Is Nio a Buy, Sell, or Hold?
Overall, Wall Street has a Moderate Buy consensus rating on NIO stock, based on six Buys, five Holds, and one Sell assigned in the last three months. The average Nio stock price target of $6.16 implies 8.36% upside potential from current levels.
