Chinese electric vehicle (EV) company NIO has secured a significant investment of more than $1 billion from an Abu Dhabi government fund, aimed at fortifying its financial position and supporting its growth trajectory. In a momentous move, NIO entered into a share subscription agreement with CYVN Holdings, an Abu Dhabi investment firm, on June 20. As per the agreement, CYVN Holdings will make an investment totaling approximately $1.1 billion in NIO through a combination of new share issuance and a share transfer from an existing shareholder.
CYVN Holdings, which primarily focuses on strategic investments in the advanced smart mobility sector and prides itself on partnering with global industry leaders, is majority-owned by the Abu Dhabi government. In this collaboration with NIO, CYVN Holdings will subscribe to 84,695,543 shares of NIO’s newly issued Class A ordinary shares, amounting to a cash investment of $738.5 million. The shares will be acquired at a purchase price of $8.72 per share, which represents the volume-weighted average price of NIO’s Class A ordinary shares on the New York Stock Exchange over the seven consecutive trading days leading up to June 19.
The completion of the transaction is subject to customary closing conditions and is anticipated to conclude in early July. Additionally, in adherence to the agreement, CYVN Holdings has committed to a six-month lock-up period after the closing, during which it will refrain from selling, transferring, or disposing of any acquired shares. Furthermore, CYVN Holdings has also entered into a share purchase agreement with a Tencent affiliate, an existing shareholder of NIO, to acquire an additional 40,137,614 shares of NIO’s Class A ordinary shares, valued at approximately $350 million based on the same purchase price of $8.72 per share. This would bring CYVN Holdings’ total investment in NIO to an estimated $1.089 billion, according to calculations by CnEVPost.
Following the completion of the investment and share transfer, CYVN Holdings will possess around 7.0 percent ownership of NIO’s total issued and outstanding shares. As a testament to the strategic partnership forged between the two entities, CYVN Holdings will gain the right to nominate a director to NIO’s board of directors, provided it maintains a beneficial ownership of no less than 5 percent of the company’s outstanding share capital.
William Li, the founder, chairman, and CEO of NIO, expressed enthusiasm about the investment, stating, “The strategic investments from CYVN Holdings demonstrate NIO’s unique values in the smart electric vehicle industry. The Investment Transaction will further strengthen our balance sheet to power our continuous endeavors in accelerating business growth, driving technological innovations, and building long-term competitiveness.” He also added, “We are excited about the prospect of partnering with CYVN Holdings to expand our international business. With the vision of Blue Sky Coming, we will continue to strive for technological breakthroughs and user experiences beyond expectations, contributing to a more sustainable future for the globe.”
Jassem Al Zaabi, chairman and managing director of CYVN Holdings, articulated the reasons behind the investment, stating, “Our strategic investments in NIO are driven by our appreciation of its leading brand, innovative and premium products, and proven technological capabilities in the smart electric vehicle market.” Al Zaabi further expressed eagerness to develop strategic partnerships with NIO and emphasized their commitment to providing strategic value that will foster NIO’s international business growth. He concluded by saying, “We will join hands with NIO to drive the global energy transition and sustainable growth for the whole humanity.”
This substantial investment comes at a crucial juncture for NIO, as the company has experienced a stock decline over the past two years and prepares to transition its entire model range to the new NT 2.0 platform. Factors such as US Federal Reserve rate hikes and geopolitical risks have adversely affected the company, leading to an 85 percent decrease in NIO shares since the beginning of 2021. Furthermore, while geopolitical and delisting risks have been mitigated, NIO’s sales growth has been constrained due to the model switch, resulting in sustained weakness in its stock price.
However, NIO has made significant progress in its model transition, having successfully migrated all NT 1.0 platform models to the NT 2.0 platform, except for the EC6, for which the NT 2.0 version has recently undergone testing. Notably, NIO faced sales challenges and intensified competition, leading to earnings falling short of expectations in the first quarter. The company reported first-quarter revenue of RMB 10.68 billion, which fell below both Wall Street analysts’ projections of RMB 12.275 billion and the lower end of its previously guided range of RMB 10.93 billion to RMB 11.54 billion. Additionally, NIO’s gross margin declined to 1.5 percent in the first quarter, compared to 14.6 percent during the same period last year and 3.9 percent in the fourth quarter of 2022, primarily due to the impact of promotional activities.
As of March 31, NIO’s financial resources included RMB 37.8 billion in cash and cash equivalents, restricted cash, short-term investments, and long-term time deposit balances. With the substantial investment from CYVN Holdings, NIO aims to leverage its strengthened balance sheet to propel its technological advancements, expand its international presence, and pursue sustainable growth, aligning with its vision of a more eco-friendly future.
