Nio (NIO) stock has dropped 5.6% in premarket trading on Tuesday following the Chinese electric vehicle (EV) upstart’s announcement of $1 billion in
The company is attempting to sell up to $1.15 billion in senior notes.Nio will announce September deliveries on October 2.has dropped 5.6% in premarket trading on Tuesday following the Chinese electric vehicle upstart’s announcement of $1 billion in senior convertible notes. Based on the Nio stock price action, it is safe to assume the market thinks most of these notes will be converted into American Depositary Shares , thus diluting existing shareholders.
Senior notes amounting to $500 million are due in October 2029, while the other half is due in October 2030. In addition to the $1 billion, each allotment allows buyers another month to purchase up to $75 million in senior notes. Combined, this would take the total note offering, and thus future dilution, up to as much as $1.15 billion.
With a market cap circa $20 billion, this possibility of dilution should reduce existing shareholder ownership by about 5% , so Tuesday’s sell-off makes sense in percentage terms.
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