NIO rallies again as new strategic investment is seen boosting sales, cash flow

NIO (NYSE:NIO) rallied for a second straight day after the Chinese electric car maker disclosed that it landed an aggregate investment of $2.2B from CYVN Holdings, an investment vehicle based in Abu Dhabi. CYVN will own 20.1% of NIO’s shares after the deal closes and be the company’s largest shareholder. However, CEO/founder William Bin Li would still own 39% of the voting rights.
Bank of America noted that CYVN Holdings will be entitled to nominate two directors to NIO’s (NIO) board so long as it continues to beneficially own no less than 15% of outstanding share capital. If CYVN Holdings beneficially owns less than 15% but more than 5% of NIO’s outstanding share capital, it will be entitled to nominate one director to NIO’s board. The firm thinks the NIO (NIO) investment will help boost cash flow.
Analyst Ming Hsun Lee: “Our analysis reveals NIO’s cash burn in 1-3Q23 is around RMB17.5bn. As a result, CYVN’s US$2.2bn will support NIO’s operation and cash flow for few more quarters.”
NIO (NIO) is expected to use the extra capital to sharpen brand positioning, bolster sales and service capabilities, and make long-term investment in core technologies. Notably, NIO (NIO) plans to hold the 2023 NIO Day and launch its flagship EV model ET9 on December 23. BofA kept a Buy rating on NIO (NIO) given the company’s advantages in the premium smart electric vehicle segment, and solid volume sales backed by the new Alps sub-brand.
Shares of NIO (NIO) rallied 4.97% late on Tuesday morning to $8.77 vs. the 52-week trading range of $7.00 to $16.18.