StockTalk(6.26): Nio to partner with CYVN Holdings: Will this drive further expansion in the EV market?
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Chinese electric vehicle manufacturer Nio $NIO Inc(NIO.US$ $NIO-SW(09866.HK$ is set to partner with CYVN Holdings, an investment vehicle majority-owned by the Abu Dhabi Government focused on advanced and smart mobility. In a share subscription agreement, CYVN Holdings will invest $738.5 million in cash to subscribe 84,695,543 newly issued Class A ordinary shares of Nio at a purchase price of $8.72 per share. The transaction is expected to close in early July 2023, subject to customary closing conditions. William Li, Nio's founder, chairman, and CEO, noted that the investment will help strengthen the company's balance sheet as it accelerates business growth, drives technological innovations, and builds long-term competitiveness.
Nio's SGX shares $NIO Inc. USD OV(NIO.SG$ have seen an 84% increase in daily turnover to S$2.0 million in June, reflecting positive investor sentiment. In addition, order book quality has improved, with best bid-ask spreads at 2.4 ticks and top-of-book depth at S$29,500 for the month to date.
Will this partnership with CYVN Holdings help Nio further expand its reach in the global electric vehicle market? With positive investor sentiment and an improved order book, what other developments can we expect from Nio soon? Would you consider owning Nio stock?
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Kopikarp : $NIO Inc (NIO.US)$ has secured an investment from Abu Dhabi's CYVN Holdings which should inject around $740 million (five months' worth of cash burn) into the company. This significant increase in their cash balance is a positive step as they continue to grow.
Despite not being currently profitable, NIO is intensively investing in expanding its production capacity, aiming to achieve a scale that will eventually result in profitability. This strategy, although costly, seems feasible for the time being thanks to the company's substantial cash-like liquidity, which stands at $4.7 billion. This approach is also not uncommon amongst EV companies still in their growth stages.
Of course, this new investment does result in some dilution of shares, but that's a fairly typical occurrence for growing businesses. Existing shareholders might see a small decrease in their portion, but on the flip side, it's encouraging to see large investors, like the Abu Dhabi government, placing their confidence in NIO.
As for expected developments, looking at sales, NIO anticipates a substantial increase in the latter half of this year. With a bolstered model lineup and projected improvements in scale, their margins are expected to improve as well.
Even though there are still uncertainties, such as their current lack of profitability and the macroeconomic risks associated with China, NIO's position as an affordable EV company and its projected growth might make it a company to keep an eye on.
Quick note: this is not financial advice. As always, it's important to do your own research before making any investment decisions.
Bull Run : SIA not NIO, how come posted here
ZnWC : According to Marketwatch, Nio share price is -13.54% YTD and hit lowest USD 7.00 (on 1st June 2023) for last 3 years. Analysts like SeekingAplha, Motley Fool and InvestorPlace give a sell rating for NIO. Fans of NIO will argue that 67% of WS analysts rate shares a Buy but the number is not convincing.
Based on earning report, Nio's deliveries still declined 22% sequentially in the first quarter. For the second quarter, it expects its deliveries to decline sequentially again to 23,500 to 25,000 vehicles, and for its total revenue to decline 9% to 15% year over year. Another issue is its vehicle margin, which is being squeezed by the pricing war in China's EV market. That metric shrank from 20.1% in 2021 to 13.7% in 2022, and then dropped year over year from 18.1% to 5.1% in the first quarter of 2023. A big share in NIO's sales is still in China.
Having said that CYVN investment will improve market sentiment in short term. It's still too early to see how the investment will help to stabilize shipments, improve vehicle margins, and narrow its operating losses. Beside NIO, CYVN (Abu Dhabi) also invested in Tencent hence I see the investment as a warmer relationship between the 2 countries and confidence vote in China economy.
bullrider_21 : Nio sold to CYVN Holdings, a mobility-focused investment company, 84.6 m shares at a price of USD8.72 each, or about USD738 m in cash. CYVN also bought another 40.1 m shares from an affiliate of existing NIO shareholder Tencent. CYVN paid USD350 m for those additional shares, bringing its total investment to nearly USD1.09 b.
The Abu Dhabi government fund will hold a combined 7% of Nio. They agreed to cooperate to jointly pursue opportunities in Nio's international business.
The large investment underscores the growing clout of China's auto industry and EV makers. China, already home of the world's largest auto market, this year has also become the No. 1 exporter of cars. It also signals the warming ties between China and the Gulf states.
Abu Dhabi's capital will strengthen Nio's balance sheet and help build long-term competitiveness.
Nio delivered 31,041 vehicles in 1Q2023, up 20.5% YoY. It would hand over 23,000- 25,000 cars to customers in Q2. Based on its deliveries of 6,658 cars in Apr and 6,155 vehicles last month, Nio is poised to sell 10,187 to 12,187 cars in Jun. The projected monthly delivery number translates into a surge over May of between 66 and 98%. The forecast is the latest sign that China's EV builders might see a strong sales recovery.
Nio expects its 2023 sales to double from 2022, in hopes the firm will no longer be in the red by the end of Q4. It delivered 122,486 EVs in 2022, representing a 34% growth YoY.
Nio will deliver 5 new models, 4 of which will hit the market in the first half, and they will boost its sales from Q3. It has planned to add 1,000 swap stations in 2023 instead of the original 400.
From Jun 1, Nio will stop providing new buyers with free home charging points and reduce the number of free battery swaps buyers can have to 4 a month. This will increase Nio's profit.
No_Horse_Run_4896 : NIO will certainly grow bigger and stronger with the partnership.