Nio raised $1.9 billion injection from parent, investors

(Bloomberg) — Nio Inc. after unveiling a cash injection worth 13.3 billion yuan ($1.9 billion) from existing shareholders. Monday saw the biggest jump in nearly five months

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The loss-making Chinese electric vehicle maker's Singapore-listed shares gained about 16% on strengthening the finances of its China unit through a mix of its own cash and funds from strategic investors.

Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., and CS Capital Co. A group of strategic investors including – Nio Holding has entered into a definitive agreement to invest 3.3 billion yuan in cash for the company's newly issued shares. Also known as Neo China, the company said in a statement on Sunday.

Nio Inc. will directly invest an additional 10 billion yuan in cash into new shares of the unit The all-party transaction will reduce Parent's holding to 88.3% from 92.1%. Strategic investors – along with other stakeholders – will hold the remaining 11.7%, the company said.

“We believe this new investment will resolve the company's fundraising woes and boost near-term cash flow,” Morgan Stanley said in a research note on Sunday. “The investment by Neo China's existing shareholders will further improve Neo's balance sheet.”

Although China has invested heavily in EVs, intense domestic competition and foreign tariffs have muddied the sector's outlook. Nio has sought to gain a competitive edge with R&D spending on its charging network and battery-swapping technology, even in non-auto areas such as semiconductors.

The cash injection will be made in two installments and will be completed by the end of the year, its statement said.

Nio Inc. Based on the same price and terms, by the end of next year Nio will have the right to invest an additional 20 billion yuan to subscribe for more shares in China.

With its cash burn triggering analysts' concerns, the company, which has never been profitable, reported a 4.5 billion yuan loss for the second quarter. But its quarterly sales rose to 17.5 billion yuan, defying weak demand and slightly above analysts' expectations.

Hefei Jianheng and Anhui Province Emerging Industry Investments are linked to the municipal government of Anhui Province. Investors in the region are familiar with Nio, inking a deal to invest $1 billion in 2020, allaying concerns at the time that the company was running out of cash.

In December, Nio struck a deal to acquire $2.2 billion from Abu Dhabi-backed CYVN Holdings LLC.

(Update with share removed from first paragraph.)

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