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Nio to issue USD 100 million in convertible notes amid slow progress in fundraising

The US-listed company’s stock slumped 7% after the announcement.

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Chinese electric vehicle (EV) maker Nio expects to raise USD 100 million by issuing short-term convertible notes to two Asian investment funds, the company announced on Thursday in a press release.

Nio said it has entered into a definitive agreement to sell convertible notes worth USD 70 million to an unidentified Asian investment fund through a private placement, which is expected to close around February 10. The Shanghai-based startup has also revealed another convertible note offering in January to another unaffiliated Asian fund on similar terms, making the total proceeds from the two placements reach around USD 100 million.

The notes will bear no interest and mature February 4, 2021. Holders of the notes can convert them into American Depositary Shares (ADSs) at the price of USD 3.07 per share after six months from the issue date, according to the statement.

Nio also said that it is working on several other financing projects, although the outcomes are unclear at the moment. The US-listed company’s stock slumped 7% and closed at USD 4.08 per ADS on Thursday despite the announcement.

Fundraising activities for Nio have progressed slower than expected in the past months. The company said in its Q3 report that its cash balance was not adequate to provide continuous operation for the next 12 months, and announced preparations for several external financing projects.

The EV startup has been in talks with Chinese automaker Guangzhou Automobile Group (GAC) since mid-January about a potential USD 150 million investment, but no definitive agreement has been reached, Nio said.

The firm was also reportedly in talks with the municipal government of Huzhou, a city in China’s eastern Zhejiang province, to raise about RMB 5 billion. However, the local government denied the report in October 2019, indicating that the project was “too risky”.

Nio made a total revenue of RMB 1.8 billion (USD 257 million) in Q3 2019, up 25% from the same quarter of 2018, beating analysts estimates of RMB 1.6 billion. It also reported a narrowing net loss of RMB 2.5 billion, representing a 10.3% year-on-year decrease.