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Nio Completes $428M ADS Offering, Stock Now Up 70% YTD

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China’s electric-vehicle maker Nio Inc (NIO) has announced the completion of the offering of 72 million American depositary shares (ADS) at $5.95 per ADS, raising $428.4 million.

The company has also granted the underwriters a 30-day option to purchase up to an additional 10.8 million ADSs.

Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC and China International Capital Corporation Hong Kong Securities Limited are acting as the joint book-running managers for the ADS offering.

NIO plans to use the net proceeds mainly to fund its cash investments in NIO China, as well as other working capital needs.

The company “expects NIO China to use the cash investments for research and development of products, services and technology, development of manufacturing facilities and roll-out of its supply chain, operation and development of sales and service network and general business support purpose.”

Shares in NIO surged 12% in Monday’s trading, and 2% after-hours following the announcement. This brings the stock’s year-to-date rally to an impressive 70%. As a result the average analyst price target of $5.40 now indicates 21% downside potential from current levels.

This comes with a cautiously optimistic Moderate Buy Street consensus. Merrill Lynch’s Ming-Hsun Lee is taking a bullish stance, and has just reiterated a NIO buy rating while ramping up the price target from $5.50 to $7.30 (7% upside potential).

According to Lee, Nio is now enjoying stronger orders and should benefit from China’s favorable EV purchase subsidy scheme. The analyst expects Nio to show vehicle gross profit improvement in Q2, as well as better free cash flow.

Indeed Goldman Sachs’ Fei Fang expects NIO to break even in 2022 once it can deliver 10,000 cars per month. Encouragingly, the company recently revealed that it delivered 3,436 vehicles in May 2020, representing a strong 215.5% growth year-over-year. (See Nio stock analysis on TipRanks).

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