Why NIO Stock Is Trading Lower Today

A secondary offering used to be oversubscribed, but it priced at a cut rate. Is that correct or snide?

What took place

Shares of Chinese electrical-car maker NIO (NYSE:NIO) had been Trading lower on Monday, after the firm acknowledged that a planned secondary stock offering had priced beneath Friday’s closing impress. 

As of 10: 15 a.m. EST, NIO’s American depositary shares had been down about 4% from Friday’s closing impress. 

So what

NIO acknowledged on Monday morning that its planned secondary offering has priced at $39 per portion. That’s a cut rate of 7.1% from Friday’s closing impress of $41.98, suggesting that the banks underwriting the offering well-known to present customers somewhat of a cut rate to creep the shares.

That’s now not in overall thought to be bullish. 

But on the opposite hand, NIO’s offering used to be “oversubscribed,” that implies that the underwriters opted to rob additional shares above and previous the initial planned quantity. 

NIO had acknowledged last Friday that it planned to present 60 million shares, and that its underwriters — Morgan Stanley and China World Capital Corporation — had the possibility to rob up to 9 million additional shares. 

That used to be revised upward over the weekend. NIO is now promoting 68 million shares (at $39), and the underwriters now occupy a 30-day possibility to rob up to 10.2 million more.

That is in overall thought to be bullish. So what does this all mean? 

A prototype NIO ET7, an upscale electric sedan.

NIO acknowledged that this can recount the proceeds of this offering for future-product construction. The firm is anticipated to open two new sedans in 2021. Image source: NIO.

Now what

For auto traders who’re pondering of NIO as an extended-term Investment, here’s what it capacity: NIO is ready to carry a total bunch of cash at a stunning correct impress. 

Particular, $39 is beneath the put the stock used to be Trading per week ago. Alternatively or now not it is a long way a lot higher than the put it used to be Trading just a few months ago. The memoir of this offering is undamaged: NIO is taking serve of the high valuation that has resulted from intense investor hobby to carry additional funds to bolster its steadiness sheet.

That’s peaceable correct news for the firm, despite the undeniable fact that the value wanted to be discounted somewhat to keep it happen. And I disclose the reality that NIO used to be peaceable Trading above $40 as I write this implies that most traders perceive that. 


John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.”>

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