Nio Eyes U.S. Stock Sale in Biggest China Offering Since Didi

(Bloomberg) — Shares of Nio Inc. retreated the most in nearly three weeks after unveiling the biggest U.S. fundraising plan by a Chinese business since Didi Global Inc.

Stock in the electric-car maker dropped as much as 6.3% Wednesday after it announced plans to sell as much as $2 billion of American depositary shares, expanding its cash holdings amid supply-chain disruptions in advance of its planned Hong Kong flotation. The company’s plan for an at-the-market offering adds to a banner year for such deals. Unlike traditional stock offerings that cater to institutional investors in one large transaction, these plans let companies sell shares on the open market over time.

If completed, Nio’s deal would be the biggest U.S. equity offering by a Chinese business since Didi’s now-infamous initial public offering in June. U.S. stock sales by companies based in China have dwindled since the ride-hailing company’s debut sparked a regulatory crackdown that weighed on investor sentiment. That sent the Nasdaq Golden Dragon China Index down by 30% between July 6 and the low Aug. 19.

Nio’s U.S. plan follows a different approach to fundraising by its rivals. Peer Li Auto Inc. raised $1.5 billion as part of a Hong Kong share sale last month, while XPeng Inc. did the same in June.

People familiar with the matter told Bloomberg in March that Nio was also considering listing on a second exchange, but this week’s offering could signal a lack of progress.

“We think this could reflect further delays in the Hong Kong listing process,” Deutsche Bank analyst Edison Yu wrote in a note.

Nio did not immediately respond to a request for comment.

Widely seen as the closest competitor to Tesla Inc. in China, Nio is one of the most prominent electric-vehicle makers in the country and is well placed to benefit from government policies that aim to encourage rapid consumer adoption of electric cars.

Supply Chain Issues

While the global semiconductor shortage has spared no automaker, Nio has been the most vocal among EV makers about its struggles with the lack of supply. Just last week, the company lowered its delivery outlook for the third quarter, citing the continued uncertainty and volatility of chip supply.

According to Bloomberg Intelligence analyst Francis Chan, these troubles may not dissipate anytime soon, as Chinese ports, which are key bottlenecks, are still at risk of being closed because of Covid outbreaks.

Proceeds from any sales under the new plan can help Nio pay down debt and lower its interest expense by about 90%, Bloomberg Intelligence analyst Steve Man said in an interview, freeing up money to invest in priorities like research and its distribution network.

Man does not see the offering signaling any trouble for the EV company’s Hong Kong plans.

“The Hong Kong IPO is less about money-raising, but more about listing in greater China,” he said.

Contact editor Bob Simison (bobsimison@caixin.com)

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