PALO ALTO, U.S. -- Chinese electric vehicle maker Nio announced a plan to sell up to $2 billion worth of new equity in the U.S. on Wednesday, leading to the sharpest dip in the price of its New York-listed shares since a fatal crash involving the company's self-driving system was reported in August.
Nio plans to sell new American depositary shares through an at-the-market offering, a prospectus filed with the U.S. Securities and Exchange Commission shows. This means the shares will be sold over time at the prevailing price rather than all at once to institutional investors at a prearranged discount.
The news comes a week after the company cut its production forecast for the rest of the year and while Nio's plans to pursue a second listing in Hong Kong remain stalled.
Nio shares fell 6% on Wednesday to close at $38.14. At that price, Nio could be selling up to roughly 52 million shares, for about a 3% increase in the share count.
The loss-making but fast-growing automaker said the proceeds will be used to strengthen its balance sheet, as well as for general corporate purposes. The company had a loss of $161 million in the first half of 2021, on revenue that more than tripled to $2.5 billion.
"It's an EV arms race, especially in China, and Nio is aggressively competing with the likes of Tesla and others," said Dan Ives, managing director at Wedbush Securities. "This capital raise is a smart strategic move to give the company dry powder as it further ramps up battery innovation and R&D spending in EVs."
Though the Chinese EV maker's stock has surged nearly fourfold since the market debut in 2018, it is trading around one-quarter lower than at the start of the year, hampered by concerns over Chinese stocks on U.S. markets, supply chain disruptions in the auto industry and a recent safety investigation in Nio's home market.
Lin Wenqin, a Chinese entrepreneur in Fujian Province, died last month in the crash of his Nio sport utility vehicle with the driver assistance function on. The company has said it will not release information about the crash until the results of a formal investigation are published. Nio shares dipped more than 6% in the week following the crash.
Regulators in both China and the U.S. have taken a skeptical approach toward Chinese listings in New York since a controversial public offering by ride-sharing group Didi Global in July, piling on new restrictions that have spooked investors and raised questions over the "variable interest entity" structure used by Nio and others to provide American investors with an indirect shareholding in the business.
At its worst, the Nasdaq Golden Dragon China Index, which tracks 98 Chinese companies listed in the U.S., halved from its peak. It is now down almost 25% year to date.
Nio, which is backed by the municipal government of Hefei, the capital of China's Anhui Province, plans a secondary listing in Hong Kong to hedge against the possibility of forced delisting in the U.S. amid deteriorating relations between Beijing and Washington, Nikkei Asia reported previously. But the Hong Kong listing has not yet moved forward.
The automaker said last week it delivered 5,880 vehicles in August, a 43% increase on the same month last year but down from 7,931 cars in July. Nio cut its production forecast for the rest of the year, citing the uncertainty and volatility of semiconductor supplies.