Nio's Planned $1 Billion Convertible Offering Follows a Stretch of Soaring Losses

In after-hours trading on Monday, U.S.-listed shares of Nio Inc., the Chinese electric-vehicle manufacturer, experienced a decline of more than 5%. This drop followed Nio's announcement of a proposed convertible-bond offering.

‍

Nio is planning a $1 billion offering, with half of the bonds maturing in 2029 and the remaining half in 2030. The company's intention is to utilize a portion of the proceeds from this offering for the repurchase of existing debt securities, while the remainder will be allocated primarily to fortify its balance sheet and for general corporate purposes.

‍

Although Nio's stock has posted a modest gain of approximately 6% year-to-date, it has witnessed a significant decrease of nearly half over the past 12 months.

‍

Of note, Nio has continued to report expanding losses, with a GAAP net loss of RMB6.06 billion in its latest quarter, more than doubling the losses from the corresponding period a year ago. Remarkably, this marks the third consecutive quarter in which Nio has reported a doubling of losses, according to FactSet data. Indeed, losses have exhibited year-over-year growth in each of the past five quarters, as per FactSet data.

‍

Furthermore, Nio finds itself operating within a competitive landscape for luxury electric vehicles, as highlighted in a recent Barron's magazine cover story. While the market for premium electric vehicles remains limited, competition in this segment has intensified.

‍

It's worth noting that Nio is not alone in turning to the convertible-note market. Other electric vehicle companies, such as electric-truck manufacturer Nikola Corp. and Fisker Inc., have also embarked on similar paths, with convertible bond offerings of $325 million and $340 million, respectively, in recent months.

‍