Written by Cláudio Afonso | LinkedIn | X
Macquarie analyst Eugene Hsiao published a new research note early Thursday a few hours after the EV maker Nio announced its plans to around HK$4.03 billion ($518 million) via a share placement.
Nio will offer 118.8 million shares at HK$29.46 each, according to the term sheet. The issue price represents a 14% discount to the stock’s closing price on March 26.
“We have previously noted the high likelihood that the company would require a further equity raise given the rapidly declining cash balance,” the analyst said in a new research note.
Nio said on Thursday that proceeds from the offering are intended to support “research and development of smart electric vehicle technologies and new products, further strengthening balance sheet as well as general corporate purposes.”
Earlier this week, the firm had raised its price target on Nio’s Hong Kong-listed shares to HK$36.00 from HK$34.00. For the US-listed shares and after the carmaker’s announcement, Macquarie reiterated a Neutral rating and $4.70 price target on Nio which implies an upside potential of 20.5% based on the current trading price of $3.90.
“Prior to the proposed transaction we estimated ~2.5 years of cash reserves. Cash and equivalents declined to 41.9 billion yuan at the end of 2024 from 57.3 billion yuan a year ago,” Hsiao noted.
The EV maker reported last week a balance of cash and cash equivalents, restricted cash, short-term investment and long-term time deposits of 41.9 billion ($5.7 billion) as of the end of 2024, down 27% year on year and 7% sequentially.
The analyst also flagged a liquidity imbalance, noting that current liabilities of the Shanghai-based Group in the full year 2024 “amounted to 62.3 billion yuan, which is higher than the current assets of 61.8 billion yuan.”
Commenting on the equity raise, Eugene Hsiao said Nio “appears to be opportunistic in raising capital following recent H-share equity placements from other EV makers like BYD and Xiaomi.”
“While this latest cash injection helps Nio to tide over its finances in the near-term, we remain concerned over the need for further external financing in the future and expect FCF to remain negative in FY25E,” Hsiao added.
“For China auto investors, the question is now less about Nio, but who is the next Chinese EV player to come to market given the relative short window between Q4 and Q1 results quiet period,” Hsiao wrote. “With BYD, Xiaomi and now Nio with fresh equity placements, it remains a key question if other H-share listed EV companies will opportunistically look to follow.”
During its earnings report last week, Nio said it would plan fundraising based on market conditions and business needs. It added that it expects available resources “will be sufficient to support our continuous operations in the ordinary course of business” until the end of this year.
In the same call, Chief Executive Officer William Li said Nio anticipates a “major improvement in the operating cash flow” starting from the second quarter. He added the company had “conducted a series of adjustments and also streamlining activities,” which would be “reflected in our performance, financial performance starting Q2.”
