Shares of NIO, the Chinese electric vehicle maker, soared on Monday following the announcement of a $2.2 billion investment from Abu Dhabi-based investor CYVN Holdings.
NIO shares jumped 11% to $8.82 in premarket trading, partially recovering from an 18% drop so far this year amidst challenges faced by the broader electric-vehicle industry.
Strengthening NIO’s Position
NIO’s founder, chairman, and CEO, William Li, expressed his confidence in the company’s future prospects, stating, “With the enhanced balance sheet, NIO is well prepared to sharpen brand positioning, bolster sales and service capabilities, and make long-term investments in core technologies to navigate the intensifying competitive landscape.”
CYVN’s Increased Stake
This new investment by CYVN Holdings will increase its holding of NIO shares to 20.1%, solidifying its position as the largest shareholder. CYVN had previously invested $738.5 million and made a share purchase of $350 million earlier this year. Additionally, CYVN will have the right to nominate two directors to the NIO board as long as it maintains ownership of at least 15% of outstanding shares.
Addressing Investor Concerns
Recent rumors about NIO planning to raise up to $3 billion in a capital raise had caused anxiety among investors. However, the company clarified that these rumors were unfounded. Despite not yet generating free cash flow, NIO has been using approximately $250 million each quarter to develop its business.
Comparing Performance
While NIO has faced challenges, other Chinese electric vehicle manufacturers have outperformed it this year. Li Auto ADRs, for instance, were down 1% in premarket trading but have seen a significant rise of 73% this year. Similarly, XPeng ADRs were up 0.9% in premarket trading, reflecting a 46% gain in 2023.
