Chinese electric vehicle (EV) company NIO Inc (NYSE:NIO) experienced a stock drop of over 4% in early premarket trading on Tuesday following the announcement of a $1 billion convertible bond financing. The bonds will likely have split maturity, with half due in 2029 and the other half in 2030, although specific details such as interest rates and equity conversion terms have not been disclosed yet.
The funds raised from this financing will be primarily used to repay existing debt facilities and strengthen NIO’s balance sheet. NIO’s American depositary receipts (ADRs) traded lower on the New York Stock Exchange, falling 4.36% to $9.86 per share.
While NIO has been experiencing growing losses in recent financial results, it has also been gaining momentum in international sales. The company, along with other Chinese EV manufacturers, has been making significant strides in the European and North American markets due to its cheaper price point compared to Tesla’s high-end models.
The CEO of Renault, Luca de Meo, recently acknowledged that Chinese EV brands are ahead of their European counterparts. He highlighted the need to close the cost gap and catch up quickly. This sentiment was echoed by the European Union, which launched an investigation into Chinese EV makers for alleged anti-competitive subsidies.
In her State of the Union speech, European Commission President Ursula von der Leyen emphasized the crucial role of the EV sector in Europe’s economy but expressed concerns about the artificially low prices of Chinese electric cars due to substantial state subsidies. She referenced the solar industry as an example of how China’s unfair trade practices had harmed European companies in the past.
NIO’s convertible bond financing reflects the company’s efforts to strengthen its financial position while navigating the competitive global EV market.
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