Nio, the China-based smart electric car developer that counts domestic corporates Tencent, Baidu, Lenovo and JD.com as investors, raised approximately $1bn when it floated on the New York Stock Exchange yesterday.
The initial public offering consisted of 160 million American depositary shares (ADSs) priced at $6.26 each, almost at the bottom of the $6.25 to $8.25 range the company set late last month. It valued Nio at $6.4bn according to Bloomberg.
Founded in 2014 as NextEV before officially rebranding in July 2017, Nio is working on plug-in electric cars fitted out with features including in-built artificial intelligence and autonomous driving systems.
Nio’s first model, the EP9 supercar, was released in 2016, and it launched its first commercial model, a seven-seater sports utility vehicle known as the ES8, in December 2017. It plans to introduce a five-seater version in the first half of next year.
The comparatively recent release of the car however means Nio is yet to record much in the way of revenue, generating less than $7m in the first half of 2018 and making a net loss of approximately $503m.
The company has earmarked approximately $382m of the IPO proceeds for research and development, while $239m will go to sales and marketing initiatives including Nio Houses, a collection of meeting hubs it is setting up.
A further $239m will be used to beef up Nio’s manufacturing and supply chain capabilities, with the estimated $650m cost of upgrading its Shanghai factory expected to be met through IPO proceeds, cash in hand and vehicle sales.
The offering followed roughly $2bn of funding, including $500m from internet group Tencent, hedge fund Hillhouse Capital, Sequoia Capital and Joy Capital in 2015, and an undisclosed sum from Tencent, e-commerce company JD.com and Shunwei Capital the same year.
Nio raised an undisclosed amount from electronics producer Lenovo, TPG, Temasek and Hopu Investment Management the following year, before Tencent and internet group Baidu co-led an $87m round in March 2017.
The carmaker added more than $1bn in a November 2017 round led by Tencent and backed by Lenovo, Hillhouse, TPG, Pine Capital, IDG Capital, GIC, Citic Capital and Baillie Gifford at a reported $5bn valuation.
Founder and CEO Bin Li is Nio’s largest shareholder despite his stake being reduced from 17.2% to 14.5% in the offering. Tencent emerged with a 13.4% share post-IPO while the company’s other notable shareholder, Hillhouse Capital, now owns 6.4%.
Morgan Stanley, Goldman Sachs (Asia), JP Morgan Securities, Merrill Lynch, Pierce, Fenner & Smith, Deutsche Bank Securities, Citigroup Global Markets, Credit Suisse Securities (USA), UBS Securities and Wolfe Capital Markets and Advisory are the underwriters for the IPO.
The underwriters have the 30-day option to buy up to 24 million more ADSs, bringing the size of the IPO to just over $1.15bn. Nio’s shares opened at $5.98 on its first day of trading yesterday but recovered to close at $6.60.