Why did NIO's US stocks plummet by 17%?
NIO's announcement of issuing $1 billion convertible bonds may trigger investors to sell the stock.
Overnight, NIO's stock in the US plummeted by a staggering 17% after a significant gap-down at the opening, shocking many retail investors.
What exactly caused this?
In the eyes of many analysts, the news of NIO issuing $1 billion in convertible bonds may have triggered investors to sell off the stock.
"It's not good news and could easily lead to market panic. Currently, NIO's stock price is relatively low, and the general market interpretation is that NIO's cash flow is tight, which is negative for ordinary investors. However, optimistically speaking, it may be helpful for NIO's business to further advance," said a hedge fund manager in an interview with First Financial Daily.
On September 19th, NIO announced its plan to issue $500 million in convertible senior notes due in 2029 and $500 million in convertible senior notes due in 2030, subject to market conditions and other factors. At the same time, NIO plans to grant the initial purchasers of the bonds an option to purchase additional principal amounts of up to $75 million of the 2029 notes and up to $75 million of the 2030 notes, exercisable within 30 days from the date of the bond issuance.
NIO's announcement did not disclose the interest rates of the bonds.
According to media reports, the coupon rate for the bonds due on October 15, 2029, is expected to be between 3.5% and 4%, with a conversion premium of 27.5% to 32.5%. The coupon rate for the bonds due on October 15, 2030, is expected to be between 4.25% and 4.75%, with a conversion premium of 27.5% to 32.5%.
Just two months ago, NIO received a large sum of money from Middle Eastern tycoons.
On July 12th, NIO announced that it had completed a strategic equity investment of $738.5 million from Abu Dhabi investment firm CYVN Investments RSC Ltd. These two financings will bring the company a total of $1.7385 billion, equivalent to 10.79% of NIO's current market value of $16.103 billion in the US stock market.
According to the announcement, NIO still has a relatively high demand for funds. The company's significant cash requirements within one year (mainly including capital commitments, operating and financing lease obligations, short-term and long-term bank borrowings, convertible bonds, asset-backed securities, and bonds) amount to as much as 19.708 billion yuan.
