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Chinese electric vehicle maker NIO’s stock (NIO) is surging on Monday after it announced a significant investment from an Abu Dhabi–backed fund.
CYVN, an investment fund majority owned by the Abu Dhabi government, will invest $2.2 billion in fresh capital in exchange for 294 million newly minted NIO class A shares at a price of $7.50 per share. The new share purchase would boost CYVN stake in NIO to 20.1%, following an investment of $1 billion CYVN made in July, making it NIO’s largest single shareholder.
“With the enhanced balance sheet, NIO is well prepared to sharpen brand positioning, bolster sales and service capabilities, and make long-term investment in core technologies to navigate the intensifying competitive landscape, while continually improving execution efficiency and system capabilities,” said William Bin Li, NIO’s founder, chairman, and CEO, said in a statement. Despite CYVN’s purchase, Li retains majority voting power in NIO due to his ownership of Class C voting shares, according to Reuters.
NIO’s move higher today notwithstanding, shares are still down nearly 13% year to date, reflecting a tumultuous period for the company. Earlier this month NIO reported a wider loss for the quarter compared to a year ago, though revenue did rise 47% in the same time period. The company also announced a 10% cut in head count in November, citing “fierce competition.”
Spurred on by Tesla (TSLA), the Chinese domestic EV market has been roiled by deep price cutting among EV rivals looking to capture market share in the world’s largest auto market. Despite these market headwinds, NIO intends to show a new flagship EV sedan at its NIO Day event later this month and will launch its “Alps” sub-brand of cheaper EVs in Europe next year. NIO currently has eight EVs in its product portfolio, which include five SUVs and three sedans.
For its part, CYVN dubs itself a fund that invests in “advanced mobility solutions” to accelerate the transition to a “more sustainable future.” The new capital injected by CYVN will ostensibly give NIO more runway for 2024 and 2025 to achieve its new product launches.
Nonetheless, Wall Street is still a little wary of NIO’s path forward, given its delivery guidance for the near term missed the mark, and more loss-making is projected in the longer term.
“NIO’s guidance of between 47,000 and 49,000 delivery units for Q4 2023 (+20% Y/Y) was weaker than expected as momentum from new launches tapers,” CFRA analyst Aaron Ho wrote in a note following NIO’s earnings results in early December. “We expect NIO to be loss-making in 2023-2024 on higher R&D spend (mainly for battery swapping, autonomous driving, and development of mass market cars) and start-up costs for the business expansion in Europe.”
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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