CYVN will increase its stake in Nio to about 20 percent with its latest investment, after finishing a roughly $1.1 billion investment in July.
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Nio (NYSE: NIO) has secured a new round of financing from Abu Dhabi government fund CYVN Holdings LLC, which has expanded its stake in the Chinese electric vehicle (EV) maker to about 20 percent.
Nio entered into a share subscription agreement with CYVN, in which the Middle Eastern investor will invest a total of $2.2 billion in cash to subscribe for 294 million newly issued shares of Nio's class A ordinary shares for $7.50 per share through its affiliate, CYVN Investments RSC Ltd, according to a statement today.
In July, Nio closed a $738.5 million strategic equity investment from CYVN. The investor also acquired certain shares of Nio's class A ordinary shares from an affiliate of Tencent at that time for total consideration of $350 million.
Following the transactions in July, CYVN owned a total of about 7.0 percent of Nio's total outstanding shares.
Upon closing of the December investment transactions, CYVN will beneficially own about 20.1 percent of the total issued and outstanding shares of Nio, according to the EV maker's statement today.
The December investment transaction is subject to customary closing conditions and is expected to close in the last week of December, Nio said, adding that both the investor and the company are subject to certain lock-up arrangements for six months after the closing of the latest transaction.
Following the closing of the latest investment, CYVN will have the right to nominate two directors to the board of Nio for so long as it continues to beneficially own not less than 15 percent of the company's issued share capital.
If CYVN beneficially owns less than 15 percent but more than 5 percent of Nio's issued share capital, it will have the right to nominate one director to the company's board.
Following the closing of the investment transaction in December, Nio and CYVN and its subsidiaries will continue to work together to pursue strategic and technical collaborations in international markets, according to the statement.
"We are deeply inspired by CYVN's vision to accelerate the global transition to a more sustainable future, and we appreciate its endorsement of Nio's unique values," said William Li, Nio's founder, chairman and CEO.
With the enhanced balance sheet, Nio is well prepared to sharpen brand positioning, bolster sales and service capabilities, and make long-term investment in core technologies to navigate the intensifying competitive landscape, while continually improving execution efficiency and system capabilities, Li said.
"We are confident that Nio will further solidify its leading position in the transformation of the automotive industry," he added.
For its part, CYVN said the move is a continuation of its strategy in the mobility space and its confidence in Nio.
"Our increased investment in Nio represents a continuation of our ongoing strategy to build a leading global portfolio in the mobility space," said Jassem Al Zaabi, Chairman and Managing Director of CYVN Holdings.
"This transaction demonstrates our confidence in Nio's unique positioning and competitiveness in the global smart EV industry. We are excited to be a long-term strategic partner of Nio and support its efforts in product innovation, technological breakthroughs and international market expansion," Al Zaabi said.
Nio saw weak deliveries in the first half of the year as several NT 1.0-based models switched to the latest NT 2.0 platform.
The weak deliveries put financial pressure on Nio, whose revenue fell to RMB 8.77 billion in the second quarter and gross margin dropped to 1.0 percent.
As deliveries improved in the second half of the year, Nio's financial position improved in the third quarter, with revenue rising to a record RMB 19.07 billion and gross profit rebounding to 8 percent.
Nio reduced about 10 percent of its positions in November as part of the company's turnaround, cost reduction and efficiency efforts.
In an internal letter in November, Li said Nio would improve resource efficiency and delay or cut investments in projects that do not contribute to the company's financial performance over a three-year period.
On December 6, Reuters reported that Nio plans to spin off its battery manufacturing unit, which could take place as early as the end of this year, after which the battery unit will seek outside investors.
A person familiar with the matter said the spin-off underscores Nio's efforts to become profitable more quickly, as the company's previous plan was to develop and manufacture some batteries on its own and outsource production of the rest to other suppliers.
The report came a day after Li said on Nio's third-quarter earnings call that for manufacturing the batteries in-house, the company doesn't see the possibility of the business helping to improve gross margins within three years, so Nio has opted for other methods.
Nio won't have any new model launches next year, instead focusing on selling its existing eight models, Li previously mentioned.
The company will unveil its flagship sedan, the ET9, at Nio Day 2023 on December 23, and executives' previous statements have hinted that deliveries of the model might not start until 2025.
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