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.
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.