Why Nio Stock Moved Higher Today

Merchants seem to be pondering extra within the long duration of time just a few contemporary capital raise.

Howard Smith

Key System

  • The market stays solid for this fleet rising firm.

What came about

Two days within the past, Chinese language electric car maker Nio (NYSE:NIO) spooked investors by asserting a thought to raise up to $2 billion in a up to date stock offering. Shares tumbled 5% on the knowledge. But the firm’s American depositary shares have begun to receive better, including at the contemporary time as soon as they were nearly 3% larger in early Trading. The shares have trimmed those beneficial properties, but unexcited were up about 1% as of 11: 15 a.m. EDT on Friday.

So what

The market perceived to be taken aback by the firm’s announcement on Wednesday of a secondary stock offering. After all, Nio already had $7.5 billion on its balance sheet as of June 30.

Dark blue Nio ES8 electric SUV in front of battery charger.

Nio ES8 electric SUV. Image supply: Nio.

Some investors perhaps idea they needs to be missing some want for extra capital, or simply that management felt the shares were so excessive it changed into prudent to add to the balance sheet. But when one thinks about it with a longer-duration of time investing framework, adding extra of a money cushion at this point within the firm’s life cycle is nice. 

Now what

While any stock in a rising sector like EVs will be very perilous, the designate pass on Wednesday changed into a knee-jerk response to the stock offering. The necessity for capital is nice because the firm works with its manufacturing accomplice to double manufacturing means. Nio is also setting up a business in Norway for its first market commence air of China. The firm made its first export cargo of its ES8 electric SUVs in July. 

And whereas world present chain points are limiting manufacturing for many car companies, including Nio, it be positive that quiz for EVs in China stays solid. Tesla (NASDAQ:TSLA) saw a solid sequential raise in August domestic gross sales for vehicles produced at its Shanghai plant, according to a Reuters account. 

With quiz seemingly to live solid successfully into the future, adding to an already solid balance sheet feels like a neat long-duration of time decision by management. And someone invested in Nio need to unquestionably be pondering for the long duration of time.

This text represents the thought of the creator, who could perhaps additionally disagree with the “official” recommendation jam of a Motley Fool premium advisory carrier. We’re motley! Questioning an investing thesis — even one among our maintain — helps us all think severely about investing and have decisions that aid us change into smarter, happier, and richer.

Howard Smith owns shares of Nio Inc. The Motley Fool owns shares of and recommends Nio Inc. and Tesla. The Motley Fool has a disclosure policy.”>

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