Nio Stock Forecast: NIO down almost 15% following news of convertible debt sale

  • NIO stock sinks almost 15% on convertible note announcement, trades below $9.
  • The company is attempting to sell up to $1.15 billion in senior notes.
  • The notes could be converted into ADS shares before they mature in 2029, 2030.
  • Nio will announce September deliveries on October 2.

Nio (NIO) stock spiralled nearly 15% lower during Tuesday's session following the Chinese electric vehicle (EV) company’s announced sale of $1 billion in senior convertible notes. Based on the Nio stock price action, it is safe to assume the market thinks most of these notes will be converted into American Depositary Shares (ADSs), thus diluting existing shareholders.

NASDAQ 100 futures, as well as the Dow Jones and S&P 500 futures, are also down over half a percent during the US session on Tuesday.

Nio stock news: Senior notes mature in 2029, 2030

Nio management says it will use the proceeds of the sale to pay down existing debt and strengthen its balance sheet. At the end of the second quarter, Nio had approximately $3.9 billion in debt – about 20% higher than six months prior.

Senior notes amounting to $500 million are due in October 2029, while the other half is due in October 2030. In addition to the $1 billion, each allotment allows buyers another month to purchase up to $75 million in senior notes. Combined, this would take the total note offering, and thus future dilution, up to as much as $1.15 billion.

The press release states, Nio “intends to grant the initial purchasers in the Notes Offering an option [...] to purchase up to an additional $75 million in aggregate principal amount of the 2029 Notes and up to an additional $75 million in aggregate principal amount of the 2030 Notes.”

With a market cap circa $20 billion, this possibility of dilution should reduce existing shareholder ownership by about 5% (or maybe a little more). There is a sizable chance, however, that little of the debt sale gets converted to equity. Nio is allowed to repurchase the senior notes prior to maturity for cash instead of handing out new ADSs.



What is Nio?

Nio is a designer and manufacturer of electric vehicles based in Shanghai, China. Formerly known as NextEV, the company changed its name to Nio in 2017. Nio trades under the NIO symbol on the New York Stock Exchange (NYSE) and under the 9866 tag on the Hong Kong Stock Exchange. The company was incorporated in 2014 but went public on the NYSE in September 2020 with a $1.8 billion initial public offering. William (Bin) Li is the CEO of Nio, which he co-founded with President Lihong Qin, another Chinese business executive.

How is Nio different from other EV manufacturers?

The main difference with other major EV brands like Tesla is that Nio offers battery swapping technology in addition to normal charging options. These swap stations allow drivers to switch out their batteries for fully-charged, identical batteries in less than five minutes, which allows owners to drive long distances without needing to stop for an hour to recharge like most other EVs. At the end of 2022, Nio had 1,305 battery swap locations and built its first swap station in Norway in May 2022. The goal for the customer is to reduce range anxiety.

What vehicles does Nio offer?

Nio began its reign with the EP9 sport car back in 2016, and the vehicle is still being produced on a small scale. Since then, Nio has branched off into more mainstream fare. The ES8 was introduced in 2018. It is a full-size SUV with a range of 311 miles. The ES6 SUV dropped the following year and has a range of 379 miles. The smaller EC6 SUV arrived in 2020, and the ET5 and ET7 sedans were released in 2021 – the latter two with versions capable of achieving 621 miles of range. The ES7 and EC7 arrived in 2022 and 2023, respectively.

Are Nio vehicles sold outside China?

Yes. While the vast majority of Chinese automakers focus wholly on the Chinese market, Nio began its foray into Europe in late 2021. After beginning in Norway, Nio began entering the German, Danish, Dutch and Swedish markets in 2022 with plans to expand throughout the rest of the decade. Although they are not yet sold in the US, Nio vehicles are being tested in California under that state’s autonomous driving program.


Nio stock forecast

Nio stock has traded down to $9.73 in Tuesday’s premarket. This is a price level it has not traded at since August 29. Since NIO stock is already trading below the 100-day Simple Moving Average (SMA), the only nearby support level is $9.50. That level has served as support going back to late 2022.

It is likely that NIO stock will fail to rise for a while as shareholders and the market digest the company’s prospects. The next chance that NIO may see a surge in buying is Monday, October 2, when the company releases data on deliveries for September. If NIO exceeds 57,000 deliveries for the third quarter, then NIO stock will likely be off to the races. One way to play that would be to purchase October 6 call options at the $10 strike price. 

NIO daily chart


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