Shares of Hong Kong-listed NIO (HK:9866) rallied after its China unit secured a capital infusion of ¥13.3 billion ($1.9 billion) from its parent company and other investors. The investment comes at the right time as the company expands its charging infrastructure and battery-swapping technology. Following the news, NIO shares rose 22% in Hong Kong trading, while the Singapore-listed shares increased by 20% as of writing.
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NIO is a Chinese automotive company known for its premium smart EVs (electric vehicles).
NIO Inc. Invests in China Unit
As part of this investment, Nio Inc. will inject ¥10 billion in cash into new shares of NIO Holding, also known as NIO China. Along with this, a consortium of strategic investors, including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., and CS Capital Co., will invest ¥3.3 billion in cash for newly issued shares of NIO Holding.
After the investment, the parent company’s ownership in this unit will decrease to 88.3%, down from 92.1%. Meanwhile, these investors and other stakeholders will collectively hold the remaining 11.7% of NIO Holding.
The company further stated that these investments will be made in two installments and are expected to be completed by the end of this year. Moreover, Nio Inc. will have the option to invest an additional ¥20 billion to acquire more shares in Nio China by the end of 2025.
Deutsche Bank Maintains Optimistic Outlook
Analyst Wang Bin from Deutsche Bank views believes that these investments will positively impact NIO’s share price. It’s important to highlight that some investors remain concerned about the company’s cash burn and huge losses in the last few quarters. Consequently, they expect that Nio will raise capital in the next three quarters, leading to potential share dilution.
However, Bin now believes that these investments will help alleviate those worries about the possibility of immediate share dilution.
Also, analysts at Morgan Stanley said that the new investments will resolve the company’s fundraising arguments and improve short-term cash flow.
Is NIO a Good Stock to Buy?
On TipRanks, 9866 stock has a Moderate Buy consensus rating based on one Buy and two Holds assigned in the last three months. At HK$44.83, the average NIO share price target implies a downside of 7.09%.
