China’s Nio Inc (NIO) has announced an offering of 60 million American depositary shares (ADSs), each representing one Class A ordinary share of the company. Shares fell 5% in Tuesday’s after-market trading.
The electric-vehicle maker also intends to grant the underwriters in the ADS Offering a 30-day option to purchase up to an additional 9 million ADSs.
Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC and China International Capital Corporation Hong Kong Securities Limited are acting as the joint book-running managers for the ADS Offering.
The ADSs will be offered under the company’s shelf registration statement which became effective on June 9, 2020. A preliminary prospectus supplement related to the proposed ADS offering has also been filed with the SEC.
According to the press release, NIO plans to use the net proceeds from the ADS Offering mainly to fund its cash investments in NIO China, as well as other working capital needs.
“We expect NIO China will use the cash investments for research and development of products, services and technology, development of our manufacturing facilities and roll-out of our supply chain, operation and development of our sales and service network and general business support purpose” the company said.
NIO stock has exploded 66% on a year-to-date basis, with both Goldman Sachs and Merrill Lynch recently upgrading NIO from hold to buy. (See Nio stock analysis on TipRanks). This gives the stock a Moderate Buy consensus.
Goldman Sachs’ Fei Fang upgrade came with a $6.40 price target (4% downside potential). “We believe ES6 and ES8 volume strength has transitioned from being promotion-driven to reputation-driven,” Fang told investors, adding that never before has a domestic premium Chinese auto brand had a waiting list.
He expects NIO to break even in 2022 once it can deliver 10,000 cars per month. Encouragingly, the company recently revealed that it delivered 3,436 vehicles in May 2020, representing a strong 215.5% growth year-over-year.
“In May, we achieved record-high monthly deliveries in our history” cheered William Bin Li, founder and CEO of NIO. He stated that the company “will further increase our production capacity and expand our sales network to support our future growth.”
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