TECH - Why Is Chinese EV Maker Nio Inc Raising $1 Billion In New Convertible Debt Right Now? | Benzinga
Investors punished NIO Inc. (NYSE: NIO) Monday after it announced it was raising $1 billion to refinance existing debt and shore up operating capital.
NIO traded down 12 cents, or 1.15% on the day Monday and dropped a further 6% after hours ending at $9.69. That move reverses all of the gains the luxury electronic car maker made during 2023 and puts the stock at half its price this time one year ago.
Beyond the announcement of the debt issuance in two tranches, there were scant details of the other particulars, so the question is: why is the company issuing this extra debt and is the stock market warranted in selling NIO right now?
Returning To Double-Digit Margins?
The $1 billion convertible note that NIO announced it is issuing in two long-dated tranches was hinted at on the company’s second quarter earnings conference call at the end of August.
A closer look at that discussion reveals how talk about refinancing was closely tied with a discussion about improvements in operating cashflows and proposed increases in product margins. As for market incumbents Tesla Inc (NASDAQ: TSLA) and BYD Co. Ltd. (OTC: BYDDF), NIO has experienced downward pressure on profit margins recently.
On the August call Citi’s Jeff Chung asked the company’s management if a combination of refinancing and increased sales of inventory would result in increased cash-flow for ...