Nio (NIO) may have just bought itself more time.
On March 5, the company announced a short-term funding deal to raise $235 million to help fund operations. Proceeds are expected to relieve near-term cash flow issues. The deal is expected to close on March 11, 2020. This is now the second time the company announced a short-term financing deal.
Nio raised $100 million in a sale of convertible notes that closed in Feb. 2020.
While there are still concerns the company’s cash balance is not enough to provide working capital and liquidity for continuous operations in the next 12 months, says the company, the latest funding deal, and talks for up to $1.4 billion in funding are keeping Nio afloat.
Reportedly, Nio is in talks with the government of Hefei for up to $14 billion in funding. “We think the news puts speculation around NIO’s funding issues to bed — at least in the foreseeable future,” said analysts at Bernstein.
“The Hefei government noted the agreement with NIO is one of 8 major deals the city has signed as part of an effort to control the virus while supporting economic development,” according to a statement from the city government’s website, as quoted by CNBC.
At the same time, Nio should benefit from a bigger demand for electric vehicles.
According to the International Energy Agency, we could see about 130 million EVs on the road by 2030, a considerable jump from 5.1 million in 2018.
In addition, just over the last five years, EV sales have been growing at a rate of nearly 41%, reports Clean Technica. “In the next 5–10 years, or by 2030, the possibility of the US and China selling more EVs than gas cars is extremely high.”
Ian Cooper’s Personal Position in NIO: None
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