A Nio Eve car is shown during the 19th Shanghai International Automobile Industry Exhibition in April.
Hector Retamal/AFP via Getty ImagesThe Chinese electric-vehicle maker is selling stock to raise money, tapping the U.S. market for the cash despite recent volatility for Chinese stocks listed here.
NIO (ticker: NIO) shares were off 6.2% in midday trading; the S&P 500 and Dow Jones Industrial Average were down 0.5% and 0.4%, respectively.
NIO shares are weak because the company is diluting the holdings of existing shareholders with its sale of about $2 billion in new American depositary receipts, or ADRs—-essentially U.S. stock in foreign corporations. NIO’s market capitalization is about $67 billion so the sale represents a dilution of about 3%.
NIO didn’t respond to a request for comment.
The sale is a small reminder to investors that NIO is a new company that still needs external funds to finance its growth. NIO is well capitalized, however. It ended the second quarter with more than $7 billion on its balance sheet, which it is using to build more auto-production capacity and invest in its lineup of vehicles.
The fact that NIO is raising money might not be as big a surprise as where the company decided to get the cash. Two of NIO’s U.S.-listed Chinese peers— XPeng (XPEV) and Li Auto (LI)—both recently decided to raise money by selling stock in Hong Kong.
NIO is sticking with its sole stock listing, in the U.S.
A second listing gives a company access to another pool of investors and capital. What’s more, NIO’s capital raising comes as the Chinese regulatory crackdown on some Chinese stocks, such as Didi (DIDI), which chose to raise money in the U.S., has led to volatility for investors.
The Golden Dragon China Index, which tracks the stocks of Chinese firms listed in the U.S., is down more than 40% from its February 52-week high. The Index has rebounded about 22% from its mid-August 52-week low.
Coming into Wednesday, NIO stock was down about 17% so far in 2021, which isn’t entirely a surprise. Shares are up about 140% over the past 12 months and rose more than 1,100% in 2020.
Write to Al Root at allen.root@dowjones.com
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