Hillhouse Capital, a longtime Nio investor and once its third-largest shareholder, sold off its holdings in the Chinese electric vehicle (EV) firm in fourth quarter after reducing its stake significantly earlier in the year, according to a filing on Friday.

Why it matters: Caution about the EV maker and about the electric car sector in general from a top-ranked private equity firm underscores the industry’s fragility and as well as the uphill battle Nio still faces in attracting badly needed funding.

  • Hillhouse also sold off all of its 147,700 Tesla shares at the end of 2019 which it had bought in the second quarter, according to a regulatory filing.

Details: Asia-focused investment firm Hillhouse Capital Management has sold its entire stake in Nio over the last quarter, the company revealed on Friday in a filing made to the US Securities and Exchange Commission (SEC) after market close.

  • The fund-management company nearly doubled its Nio holdings to 41.9 million shares in Q2 of last year, but reversed and sold off two-thirds in the third quarter, reducing its holdings to 13.36 million shares.
  • Known for being an early investor in Chinese tech giants Tencent and JD.com, Hillhouse was Nio’s third-largest institutional shareholder with a 6.2% stake in the company behind Tencent and Scottish investment house Baillie Gifford, Nio wrote in its annual report released in April 2019.
  • The investment firm was an early Nio backer, leading its $100 million Series A in 2015 with a follow-on investment in the EV firm’s $600 million Series C two years later. It held 7.5% of its shares as a principal shareholder when Nio went public in the US in September 2018.
  • Nio’s share price reached its lowest point of $1.19 in the beginning of October and remained depressed for most of the quarter. Shares shot up by more than 53% to $4.87 on Dec. 30 after the EV maker posted smaller-than-expected quarterly losses.
  • A Nio executive told Chinese media that the company respects investor choices, and declined to comment further. Hillhouse did not respond to TechNode’s request for comment.
  • Hillhouse held 210 million shares worth $8 billion by year-end from 54 companies including Chinese e-commerce giant Alibaba, video-streaming platform iQiyi, and video-conferencing firm Zoom, according to filings.

Context: Hillhouse’s filing follows a day after Nio announced another $100 million short-term debt offering in convertible bonds from two unnamed Asia-based investment funds, which is expected to close on Feb. 19. The company had just announced a similar deal to raise $100 million just a week earlier, on Feb. 6.

  • Nio’s stock price dropped 6.5% to $3.77 on Friday amid lingering concerns over whether it will be able to raise new financing in amounts significant enough to sustain growth.

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen

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