Chinese electric vehicle manufacturer NIO has unveiled a strategic move to issue $1 billion in convertible senior notes, prompting a decline in its share prices during after-hours trading. The company's announcement outlines its intent to issue $500 million in convertible senior notes due in 2029 and an additional $500 million in notes due in 2030.
Initial purchasers will have the option, available within 30 days of note issuance, to acquire up to an additional $75 million in aggregate principal amount of the 2029 notes and up to an additional $75 million of the 2030 notes. These notes will be considered senior unsecured debt for NIO, with maturity dates set for October 15, 2029, and October 15, 2030, respectively.
Holders of these notes will have the flexibility to convert them at any time before the maturity date. Upon conversion, NIO will provide converting holders with payments in the form of cash, American Depositary Shares (ADSs), or a combination of both.
NIO has earmarked a portion of the proceeds from this note offering to repurchase some of its existing debt securities. The remaining funds are slated for bolstering the company's balance sheet and serving general corporate purposes.
This move marks the second fundraising initiative by NIO within a three-month period, which has prompted a 5.72 percent dip in its stock price during after-hours trading. In June, NIO entered into a share subscription agreement with CYVN Holdings, an Abu Dhabi-based investor, which committed to investing approximately $1.1 billion in the Chinese electric vehicle company. Subsequently, in July, NIO successfully secured a $738.5 million investment from CYVN Investments RSC Ltd, an affiliate of CYVN Holdings, along with the acquisition of certain NIO shares from Tencent's affiliate for a total of $350 million.
As of June 30, NIO reported a balance of RMB31.5 billion in cash and cash equivalents, restricted cash, short-term investments, and long-term time deposits. This marked a decrease of RMB6.3 billion compared to the end of the first quarter, primarily attributed to NIO's lower-than-expected vehicle deliveries in the first half of the year and its continued substantial investments in research and development.
Recent reports also suggest that NIO may embark on chip development, potentially taping out two chips in the coming year based on 7 nm and 5 nm processes. These endeavors would require substantial research and development funding, with estimated costs of approximately $30 million for a 7 nm chip and around $500 million for a 5 nm chip, according to sources familiar with the matter. Consequently, NIO aims to secure sufficient funds to support these ambitious projects.
