The long-awaited bail-out for cash-strapped Nio from an imminent liquidity crisis is finally arriving. The electric vehicle maker announced Wednesday it will receive a RMB 7 billion cash infusion with final commitments from several state-run capital firms, its biggest ever funding round since listing in the US stock market in Sep. 2018.
Why it matters: Nio now can really go toe-to-toe with Tesla, the absolute leader in the market, and enhance its opportunities for more financing.
- Earlier this year, Nio and the government of Hefei in the eastern Anhui province, its major new backer, revealed plans for a domestic listing on China’s Nasdaq-like tech board by 2025.
- The company later declined to comment, reported Chinese media.
Details: Nio has signed “definitive agreements” for a RMB 7 billion ($990 million) financing project with strategic investors including Hefei City Construction and Investment Holding (Group) Co., Ltd., State Development & Investment Corp., Ltd, and Anhui Provincial Emerging Industry Investment Co., Ltd.
- The investment represents a 24.1% stake of the joint venture, “Nio China.”
- Nio will set up Nio China in the Hefei’s economic and technological development area with the group of strategic investors for the cash injection
- The rest of the shares will be taken by Nio at RMB 4.26 billion, alongside injection of its core business and assets into the new entity, including car development and production, supply chain and recharging service Nio Power, valued at RMB 17.77 billion.
- The company expects to close the deal in the second quarter of this year.
- A combined RMB 4.8 billion as a first installment will be on the account within five working days when it is closed.
- Nio’s stock prices soared 16.2% to $3.9 before trading on Wednesday as of this publication.
Context: Nio and the Hefei government signed a framework agreement for an expected RMB 10 billion funding plan in late February. This came at the same time when the company kicked off production of its third electric SUV model EC6, targeting Tesla Model Y, in its joint plant with JAC Motors in Hefei.
- Tencent-backed Nio had a bumpy road in financing over the past year, making no progress in a RMB 10 billion investment plan revealed in May with E-Town Capital, an investment entity of the Beijing municipal government.
- The company raised a total $435 million via convertible notes from four Asia-based investment funds since the start of this year, alongside two rounds of convertible bond financing totaling $850 million from major backers including Tencent last year.