Breaking: Nio Announces $470 Million Investment in Nio China from Strategic Investors

Nio China has received RMB 3.3 billion in new investment from strategic investors in Hefei and will invest RMB 10 billion to subscribe for newly issued shares in Nio China.

(A Nio ET5 on display at the June 2024 Shanghai New Energy Vehicle Show. Image credit: CnEVPost)

Nio (NYSE: NIO) announced that Nio China has received a new investment from investors in Hefei, Anhui province, as its Chinese business entity receives further support from the city.

The EV maker announced today that it has entered into definitive agreements with Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co Ltd and CS Capital Co Ltd to invest in its 92.1 percent-owned Chinese subsidiary, Neo Holding Co Ltd. (Neo China).

Nio China's three existing strategic investors will invest a total of RMB 3.3 billion ($470 million) in cash to subscribe for newly issued shares in Nio China, according to a statement.

At the same time, Nio will invest a total of RMB 10 billion in cash to subscribe to China's newly issued shares.

After the investment transaction is completed, Nio will hold a controlling 88.3 percent stake in Nio China and strategic investors along with other existing shareholders will hold the remaining 11.7 percent stake in Nio China.

Nio also has the right to invest an additional RMB 20 billion to subscribe for additional shares in Nio China by December 31, 2025 at the same price and on the same terms as the investment transaction.

The transaction is subject to regulatory and internal approvals and customary closing conditions.

The strategic investors and Nio will inject capital into Nio China in two phases, with 70 percent of the strategic investment amount and the Nio investment amount to be made by the end of November 2024, with the remaining 30 percent to be made by the end of December. 2024.

The investment not only demonstrates strategic investors' strong support for the high-quality development of the EV industry, but also highlights Neo's unique value and strong recognition of industry leadership, the EV maker said.

With an enhanced balance sheet, Nio is strategically positioned to maintain long-term advantages in technology, products, services and user communities, the company said.

This will drive its multi-brand strategy and broader market penetration, taking the company to the next phase of sustainable growth, it said.

Nio China is a subsidiary of Nio, headquartered in Hefei, founded in late 2019 after Hefei investors bailed out the EV maker. Nio's global headquarters are located in Shanghai.

On April 29, 2020, Neo signed an agreement with Hefei Strategic Investors regarding investment in China. Strategic Investors and Nio invested RMB 7.0 billion and RMB 4.26 billion respectively in Nio China at the time.

Upon completion of the transaction in April 2020, both parties hold 24.1 percent and 75.9 percent equity interests in Neo China, respectively, and Neo China has a capital increase of RMB 11.26 billion.

In February 2021, Neo said it would repurchase 3.305 percent of the equity from two strategic investors in Neo China for 5.5 billion RMB. At the same time, Neo increased its equity stake in China by RMB 10 billion.

After the completion of the equity acquisition and capital subscription, Neo holds an overall controlling stake of 90.36 percent in China, according to the February 2021 statement.

During the first quarter 2020 earnings call, Neo founder, chairman and CEO William Lee said that Neo China has the potential for an IPO in the Chinese market.

The February 2021 buyback move was then thought to be a possible preparation for Neo China's IPO, although Neo later denied it.

A February 2021 report in Securities Journal noted that under Nio's definitive investment agreement with Hefei in 2020, Nio China must file an IPO within 48 months and achieve an IPO within 60 months.

Otherwise, Nio will have to repurchase shares of Nio China at the redemption value of the total investment by the strategic investors along with interest at 8.5 percent compounded per annum, the report said.