Chinese EV major, NIO (NYSE: NIO) announced a strategic investment of $738.5 million in cash from CYVN Holdings, an investment vehicle that is primarily owned by the Abu Dhabi Government. As a part of this investment, CYVN Holdings, will subscribe to 84.67 million of NIO’s Class A ordinary shares at a purchase price of $8.72 per share.
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The investment is expected to take place in July this year and after the closing of this transaction, CYVN Holdings will be able to nominate one Director to NIO’s Board of Directors as long as the investor continues to beneficially own 5% of the EV company’s outstanding shares.
NIO stated in its press release that it was aware that CYVN has “entered into a share purchase agreement with an affiliate of Tencent (the “Existing Shareholder”) pursuant to which the Investor will purchase 40,137,614 Class A ordinary shares of the Company beneficially owned by the Existing Shareholder (the “Secondary Share Transfer”). Upon the closing of the Investment Transaction and Secondary Share Transfer, the Investor will beneficially own approximately 7.0% of the Company’s total issued and outstanding shares.”
Shares of NIO have risen by more than 5% in the past month following its mixed Q1 results even as the company issued a softer Q2 outlook. In the second quarter, NIO expects to deliver between 23,000 and 25,000 vehicles, a decline of around 8.2% to 0.2% year-over-year while total revenues are anticipated to be between $1.27 billion and $1.36 billion, representing a decrease in the range of 15.1% to 9% year-over-year.
NIO’s management gave more color to its Q2 outlook at the Bank of America 2023 Asia Conference in New York last week. The company’s management stated that it expects its ET5 Touring model to post higher or similar sales as compared to its ET5 model. As a result, the company has projected sales volume to be around 10,000 in June with average monthly sales in the second half of the year to be around 20,000.
The company is planning to set up more pop-up stores in the latter part of this year to provide more test-driving opportunities to its customers in the hope of winning more orders. NIO has projected a gross margin of 10% in Q3 and 15% in the fourth quarter on the basis of higher sales, better product mix, and stabilizing prices.
Following the conference, Bank of America analyst Ming Hsun Lee reiterated a Buy rating and a price target of $11 on the stock, implying an upside potential of 18.2% at current levels.
Overall, analysts are cautiously optimistic about NIO stock with a Moderate Buy consensus rating based on seven Buys and four Holds.
