Loss-making Chinese Tesla rival Nio expands new American depositary shares sale, raises US$428 million on strong demand

Strong US and Asian investors’ demand for its first new share sale since listing in new York comes even as Nio says it will not pay dividends any time soon

The loss-making start-up aims to shore up cash reserves via a sale of American depositary receipts as momentum in electric vehicle delivery picked up in May

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Nio’ ES8 electric SUVs on display at the Shanghai auto show in April, 2019. Photo: Reuters

Published: 8:00pm, 11 Jun 2020Updated: 3:38pm, 26 Jan 2021

Chinese electric car maker Nio has expanded its new shares offering to 72 million American depositary receipts (ADRs), from 60 million, raising US$428.4 million in what might signal a turnaround in investors’ sentiment towards the loss-making start-up.

The final price was set at US$5.95 per ADR, about 5.6 per cent lower than Wednesday’s closing price at US$6.3 on the New York Stock Exchange. Still, Nio succeeded in raising more net proceeds than the US$344.2 million estimate it had stated in its prospectus.

The upsizing was due to “strong demand from US and Asian investors”, said a person close to the transaction.

There is still an overallotment option for the underwriters to buy nine million more ADRs within a 30-day period to cover additional investors’ demand. Credit Suisse, Morgan Stanley and CICC are the joint-bookrunners for the deal.

The resurgence of investors’ demand for Nio’s shares this week has defied a lengthy spell of underperformance for the vehicle maker’s stock. From March 2019 until last Tuesday, the share price had been languishing below the IPO offer price of US$6.26. Nio debuted in New York in September 2018.

Such strong demand seems to suggest investors do not mind buying into a stock with zero dividend yield. Nio said in its prospectus detailing the share offering that it does not have any plans to pay cash dividends “in the foreseeable future”, and would reserve any future earnings for expanding its business.

Nio’s latest fundraising effort comes after the Shanghai-based start-up made record deliveries in May, with 3,436 electric sport utility vehicles – its ES6 and ES8 models – delivered, according to the company’s communications department.