China's Nio trades up after smaller-than-expected US IPO

The company sold 160 million American Depository Shares (ADS) at $6.26 apiece, close to the bottom end of the indicative range. A further 24 million shares could be added to the IPO if underwriters fully exercise the overallotment option, according to a statement. Nio’s stock opened at $6.00 and reached at high as $6.93 before closing at $6.60.

Nio reportedly launched its IPO process with an ambition to raise $2-3 billion. The company’s prospectus indicated that capital expenditure for the next three years would be $1.8 billion, with approximately $600 million required in the first 12 months. This includes $650 million for a factory upgrade in Shanghai.

Formerly known as NextEV and also called “Weilai” in Chinese, Nio was established in 2014 by Bin Li, founder of Bitauto Holdings, and Xiang Li, founder of Autohome. The company’s first vehicle was the EP9 supercar, introduced in 2016. This was followed by a debut mass volume manufactured vehicle – the seven-seat premium ES8 – in December 2017. It started making deliveries in June 2018.

As of July, Nio had delivered 481 ES8s and had unfulfilled reservations for more than 17,000 vehicles, with deposits paid. Buyers initially pay a refundable deposit of RMB5,000 ($729), and upon signing a purchase agreement, that sum becomes non-refundable and an additional payment of RMB40,000 is required. The number of orders that have reached the non-refundable stage is 4,989, the company said in its prospectus.

A second volume manufactured vehicle, the five-seater ES6, is planned for launch by the end of 2018. The company also plans to open at least five more sales outlets – known as Nio Houses – this year. It had seven as of July.

Prior to the IPO, Tencent Holdings held a 15.2% stake in Nio, while Hillhouse had 7.5%. Other investors include Baidu Capital, which contributed $100 million to a $600 million Series C round in March last year that went on to raise about $1 billion after being extended by a group including Everbright-IDG Industrial Fund, an M&A vehicle jointly launched by China Everbright and IDG Capital.

Hillhouse was among the earliest investors, providing $80 million alongside Shunwei Capital in 2015. Later the same year, Sequoia Capital China and Joy Capital invested $40 million. Other backers include TPG Capital, CITIC Capital Partners, GIC Private, and Warburg Pincus. The company has raised about $1.9 billion in total.

Nio began generating income this year with RMB46 million in revenue recorded for the six months to June, almost all of which was attributed to vehicle sales. The company incurred losses of RMB2.6 billion and RMB5 billion in 2016 and 2017, respectively. Losses came to RMB3.3 billion during the first half of 2018.

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• Topics
• Greater China
• Technology
• IPO
• Cleantech
• China
• automobiles
• Tencent
• Hillhouse Capital Management