It's almost certain that Geely Automobile, China's largest domestic car maker, will invest $300 million in Nio, Autocarweekly quoted sources as saying.
The source also revealed that Geely may integrate production capacity of Nio, which will be produced by Geely for Nio in the future.
Geely plans to invest about $300 million, which will account for less than 10% of Nio's shares, and is expected to become Nio's third largest shareholder, said a WeChat account focusing on the automotive industry on Tuesday.
In response to this report, Autocarweekly quoted Li Bin as saying today, "these rumors are too many, regardless of these rumors, we are all pragmatic companies." "Rumors about this type of market No comment, please refer to our announcement," he said.
Geely representative said, "I don't know about it and don't comment on market rumors."
It is worth noting that although both sides characterized it as a rumor, they did not deny it.
This "rumor" confirms another "rumor" one month ago: including Geely, GAC and SAIC, all of which are bidding for Nio with an investment scale of US $1 billion. Now the protagonists are up, and the amount has shrunk by $700 million.
According to the above-mentioned sources, Geely 's investment in Nio will be similar in form to Geely 's investment in Daimler. In other words, financial injection does not seek power to interfere with operations and aims to promote strategic synergy.
This strategy will greatly reduce the investment risk of Geely.
Nio's 2018 financial report shows that the largest major shareholder is Li Bin, holding 14.4% of the shares; followed by Tencent, 13.3%; followed by Bailie Gifford & Co., 9.7%. At the time, the fourth largest shareholder, Gao Capital, had cleared its positions before the end of last year.
More important than these figures are the corresponding voting rights, with Li Bin accounting for 48%, Tencent's 21.6%, and Baillie Gifford & Co.'s only 4.1%. Disproportionate to the number of shares held.
This is because Nio adopted a three-tier ABC equity structure in the design of the equity structure, which separates voting rights from cash flow rights. Class A, B, and C stocks each have 1 vote, 4 votes, and 8 votes, respectively.
Class B and C shares can be converted into Class A shares, but Class A shares cannot be reversed; holders of Class B and Class C shares will automatically be converted into Class A shares if they are transferred externally. From the chart, C-level stocks are in Li Bin's hands, and B-level stocks are in Tencent's hands.
Through the rules, Li Bin's control is stable.
For Li Bin and Li Shufu, who are highly skilled in financial technology, if there is an agreement, there will be no problems in the process. The key lies in how Geely views the return on investment of the entire account.
A month ago, Geely intended to invest $1 billion. According to the current market value calculation, the equity ratio is about 25%, and Geely will be the largest shareholder (as mentioned earlier, this role is not too great).
At the same time, one of their funding requirements was to require Nio to replace Li Bin, and he did not want him to serve as chairman and CEO to ensure more reasonable costs and profits for the investment project.
It cannot be said that it is completely impossible, and everything can have a price. However, if Geely insists on acquiring shares that can leverage the right to speak, the amount of negotiation and funding required will be much greater than the price of being the largest shareholder on the surface, much larger than $1 billion. Not to mention, Nio's future and fate will be shouldered in the future.
This is not as good as a strategic investor standing on the first opportunity. From the shrinking investment amount, we can also see Geely's choice, and speculate that Li Bin, who had previously been stuck, stayed with the problem and reached a high probability of reaching a settlement.
Right now is a good time to invest in Nio.
Nio's lack of money is almost a consensus in the industry, and coupled with the difficult times, it can be imagined that funding is becoming tighter. From the employee's internal letter released by Li Bin a few days ago, we can glance at a few things:
"We are not the same as other mature companies. We are still a start-up company seeking survival. This epidemic has added to the difficulty of our work. Please everyone recognizes that to survive, we need every colleague to go all out."