KEY STAT | Cash-craving Nio issues second round of convertible notes in 2020

Is Nio facing the risk of running out of cash?

Chinese electric vehicle manufacturer Nio (NYSE: NIO) has started to raise its second private placements of short-term convertible notes in the year, expecting to collect USD 235 million from several unaffiliated Asia-based investment funds by March 11, krASIA reported.

A convertible note is a form of short-term debt that converts into equity usually together with a future funding round.

The notes mature on March 5, 2021, prior to which holders can “convert either all or part of the principal amount of the notes into Class A ordinary shares of the company”, said Nio.

In February this year, Nio announced the first USD 100 million deal in short-term convertible notes to two Asian investment funds.

Three months into 2020, Nio has already made four fundraising moves: two rounds of a total of USD 435 million convertible notes, an USD 1 billion investment from Guangzhou Automobile Group, and an RMB 10 billion (USD 1.4 billion) joint project with the municipal government of the Chinese city of Hefei.

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With its newest automobiles priced almost on par with Tesla, Nio is considered a premium EV brand in China. After rapid growth in 2018, the New York-listed company announced in last December’s quarterly report that its cash balance was not adequate for continuous operations during 2020.

In the last quarter of 2019, Hillhouse Capital, Nio’s third-largest investor, which had backed the company since its series A fundraising, sold out all it shares.

The recent fundraisings would certainly help ease the shortage of cash, but a 3.88% drop on its stock price the day Nio announced the latest convertible notes news suggests the carmaker still needs to prove itself with solid vehicle sales numbers.