NIO Is Selling More Stock. That’s Good and Bad News. - Barron's

guduka.blogspot.com

A NIO EP9

Getty Images

U.S.-listed Chinese electric-vehicle maker NIO is raising more money, taking advantage of recent strong stock performance. For investors, that’s good news in one respect and troubling in another.

Thursday evening, NIO (ticker: NIO) announced plans to sell an additional 60 million American depository receipts, or ADRs. Depository receipts are, essentially, stock in a foreign company. NIO is based in China, but its shares only trade in the U.S.

It’s the second time NIO has sold shares in recent months. The company sold 75 million ADRs in August at $17 a piece. Between that stock sale and Thursday’s closing price, NIO shares rose another 127%.

Shares have been on an epic run, up about 1,900% over the past year, crushing comparable returns of the S&P 500, traditional automotive stocks and even Tesla (TSLA). Tesla shares are up about 790% over the same span.

Here’s the good news for investors: The extra cash could help NIO grow by adding manufacturing and distribution capacity. Chinese EV sales have accelerated in recent months as battery costs have fallen and the Chinese government has provided more stimulus to produce EVs in the country. EV makers in China have sold everything they built so far this year.

The bad news: There are more shares outstanding, which means a little dilution for existing share holders. NIO has issued more than 10% of shares outstanding so far in 2020. Generally, management likes to sell shares when prices look good and not when shares look undervalued. Repeated stock sales can be a warning for investors.

Nothing bad happened to NIO shares in August. They continued their march higher and shares have picked up more Buy ratings from analysts since the August capital raise. Seven analysts, or about 47% of those who cover the stock, rated shares Buy in late August. Now 12 analysts, or 67%, rate shares Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 58%.

For now, shares are down in premarket trading after the stock sale. NIO stock was off about 6.8%. S&P 500 and Dow Jones Industrial Average futures were off about 0.5% each.

Write to Al Root at allen.root@dowjones.com

Let's block ads! (Why?)

"selling" - Google News
December 11, 2020 at 09:13PM
https://ift.tt/3qQj8lB

NIO Is Selling More Stock. That’s Good and Bad News. - Barron's
"selling" - Google News
https://ift.tt/2QuLHow
https://ift.tt/2VYfp89

Bagikan Berita Ini