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Fresh out of its “NIO Day” event this weekend, the Chinese electric vehicle (EV) maker NIO (NYSE: NIO) announced its intention to issue convertible debt to raise $ 1.3 billion. Investors liked what they heard over the weekend when the company announced plans for its first luxury sedan, a new, longer-lasting battery, and updates on its battery swap program. .
NIO is trying to build on its momentum with plans to issue convertible senior notes of $ 650 million each in 2026 and 2027. NIO said it plans to use the funds “primarily for general corporate purposes and to further strengthen its cash and balance sheet positions.”
NIO ET7 luxury sedan. Image source: NIO.
Once pricing for the new notes was established, NIO said it would privately negotiate agreements with the holders of its outstanding 4.50% convertible notes due 2024 to exchange part of them for U.S. deposit shares (ADS ).
NIO previously reported that it more than doubled its vehicle deliveries in the fourth quarter of 2020 compared to the previous year period, with more than 17,000 electric vehicles delivered. The announcement of its first luxury sedan puts the company in a more competitive position with You’re hereof (NASDAQ: TSLA) Models.
Investors cheered the news of the NIO Day presentation today, but stocks retreated after the debt issuance was announced. In the announcement, NIO alerted shareholders that the offer and eventual exchange of the 2024 tickets “could decrease (or reduce the size of any increase) in the market price of ADS.”
Investors shouldn’t fear a capital raise if management is trusted to use the money to grow the business wisely. But NIO is currently valued at $ 90 billion, which doesn’t leave much room for anything other than stellar execution.
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