Chinese electric vehicle (EV) company, Nio, has experienced a 5.6% decline in its stock value after announcing the issuance of $1 billion in convertible senior notes. This has raised concerns about the potential dilution of existing shareholders’ ownership. The notes, which mature in 2029 and 2030, can be converted into American Depositary Shares (ADSs) before maturity.
The company plans to use the proceeds from the sale to reduce existing debt and strengthen its balance sheet. Currently, Nio has around $3.9 billion in debt, representing a 20% increase compared to six months ago. The offering also includes an option for buyers to acquire an additional $75 million in senior notes, potentially raising the total offering to $1.15 billion.
Although this possibility of dilution has triggered a massive sell-off among existing shareholders, there is a chance that a small portion of the debt sale may be converted into shares. Nio has the option to repurchase the senior notes in cash instead of issuing new ADSs.
Formerly known as NextEV, Nio is an electric vehicle manufacturer based in Shanghai. It went public on the New York Stock Exchange in 2020 and is known for its battery swapping technology, which alleviates range anxiety for electric vehicle owners. Nio has a range of vehicles, including sports cars, SUVs, and sedans, and has recently expanded its operations into European markets. The company is set to announce its September deliveries on October 2nd.
– Nio stock recedes more than 5% on convertible note announcement, trades below $10