Shares of NIO Inc. (NYSE: NIO) fell on Monday following reports of a possible $3 billion fundraising effort. According to insider sources cited by Bloomberg, the Chinese automaker has initiated discussions with potential investors in the Middle East to secure additional capital. This move comes as NIO grapples with significant financial hurdles.
The sources suggest that this fundraising endeavor could materialize as early as next year, though it remains in the nascent stages and is subject to change. Notably, there is no definitive confirmation that NIO will proceed with the fundraising effort.
In response to these rumors, NIO issued a statement asserting that it currently has no reportable capital-raising activity in the works, except for the recently announced $1 billion convertible notes offering completed earlier on Monday. The company raised $738 million in June through a share sale to Abu Dhabi-based CYVN Holdings LLC.
Founded in 2014, NIO has faced continuous challenges in turning a profit and is grappling with cash burn issues. The company reported a loss of over $800 million in the last quarter, significantly higher than market estimates. The market capitalization of NIO has also dipped over 50% in the past year, now hovering around $14 billion.
NIO has made substantial investments in eye-catching showrooms, battery and charging infrastructure, and intensive research and development efforts to cater to middle-class consumers and early adopters of electric vehicles (EVs) in China, the world’s largest auto market.
NIO’s gross margin dipped to as low as 1% in the second quarter due to intense price competition in the Chinese electric vehicle market, led by its rival Tesla Inc. (NASDAQ: TSLA).
Even though NIO Inc. (NYSE: NIO) has experienced a recent uptick in monthly deliveries, its performance has been far from stellar. The company managed to ship just 94,352 vehicles in the first eight months of 2023, significantly lagging behind its annual target of 250,000 units.
Founder and Chief Executive Officer William Li acknowledged in June that NIO had to delay certain investments and adopt a more cautious approach to overseas expansion. However, the company made headlines recently by launching a smartphone that seamlessly syncs with its cars.
NIO remains optimistic about the future, with Li stating that short-term investments in research and development are expected to yield a gross margin of around 20% in the long run. He anticipates a resurgence in gross margin to double digits in the third quarter, buoyed by the decreasing price of lithium, a crucial raw material in electric vehicle batteries.
As of the latest update, NIO Inc. (NYSE: NIO) stock is trading at $8.33, down -2.34% compared to the previous trading session.