Nio Inc. Convertible-Bond Offering Leads to Share Decline

U.S.-listed shares of Nio Inc. experienced a decline of more than 5% in after-hours trading on Monday following the Chinese electric-vehicle company's announcement of a convertible-bond offering.

The Offering Details

Nio is proposing a $1 billion offering, with half of the bonds maturing in 2029 and the other half in 2030. The company plans to utilize a portion of the proceeds to repurchase existing debt securities and allocate the rest towards enhancing its balance-sheet position and general corporate purposes.

Recent Performance

Shares of Nio have shown a modest 6% increase year-to-date. However, over the span of 12 months, they have fallen by nearly half.

Growing Losses

Nio continues to face mounting losses. In the latest quarter, the company reported a GAAP net loss of RMB6.06 billion, which is more than double the losses from the same quarter in the previous year. Disturbingly, this marks the third consecutive quarter in which losses have doubled compared to the corresponding periods, according to FactSet data. Over the past five quarters, losses have consistently grown on a year-over-year basis.

Competitive Pressure

Nio finds itself amidst a crowded market for luxury electric vehicles. As highlighted in a recent magazine cover story, expensive electric vehicles only account for a small fraction of overall vehicle sales. Intense competition further adds to the challenge in this space.

Convertible Notes Trend

Nio is not alone in exploring the convertible-note market. Other electric-vehicle companies have taken similar steps. Nikola Corp., an electric-truck maker, announced its intention to launch a $325 million offering for senior convertible bonds in August. Likewise, Fisker Inc. concluded a $340 million convertible-debt offering in July.

Despite these developments, Nio's convertible-bond offering has triggered a decline in its stock value, reflecting the uncertainty prevailing in the markets.