Investor concerns dogs Chinese electric carmaker – NIO Inc’s U.S. IPO

Worries over Tesla’s production are casting their shadow over other electric carmakers who are aiming to produce low-cost mass-market cars.

As per sources familiar with the matter at hand, in NIO Inc’s U.S. IPO, the Chinese electric vehicle startup priced its shares at the bottom of its targeted price range due to investor concerns of its prospects with its peers, including Tesla Inc.

With Tesla struggling to meets its production targets and with Elon Musk’s failed attempt to take Tesla private, there is growing investor concerns on peers looking to bring cost effective electric cars to the consumer market.

A number of Chinese electric carmakers are hungry for capital to develop technologies surrounding advanced battery and autonomous driving. Authorities in China want to rapidly expand the country’s electric car market to curb pollution from vehicles, boost energy security and promote high-tech industries.

According to 4 sources familiar with the process, NIO priced its shares at $6.26, just above the bottom end of its price range of $6.25 to $8.25. As a result, NIO’s market capitalization stood at $6.41 billion on Wednesday – the first day of its trading on the New York Stock Exchange under the symbol “NIO”.

NIO was founded in 2014 by Chinese entrepreneur William Li. In its U.S. IPO, Li sold $1 billion shares making it the third-biggest U.S. listing by a Chinese firm in 2018.

According to a source, NIO had hoped for a valuation of $20 billion. It plans on using the IPO proceeds for research and developments of products and technologies, developing manufacturing facilities and for marketing purposes.

NIO is backed by Chinese tech giant Tencent Holdings Ltd, Sequoia Capital, investment firm Hillhouse Capital Group, and a private equity fund established by Baidu Inc.

In the first six months of 2018, NIO incurred a net loss of $502 on revenues of $6.95 million.

NIO started delivering its ES8 pure-electric, seven-seat SUV, a rival of Tesla’s Model X, in June.

In its listing prospectus, NIO stated it had delivered around 1,600 ES8s and had 15,778 unfulfilled orders for its car. It plans on launching a more pocket-friendly SUV, the ES6, by the end of 2018.

JPMorgan, Goldman Sachs, and Morgan Stanley led NIO’s U.S. IPO. Deutsche Bank, Bank of America Merrill Lynch, Citigroup, Credit Suisse, and UBS were also involved.


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