Nio (NYSE:NIO) just dropped a bombshelland investors aren’t thrilled. The EV maker announced a surprise offshore share sale of nearly 118.8 million new Class A shares, representing about 5.4% of its current float. The deal is priced at a sharp 9.5% discount to its last Hong Kong close, signaling urgency. Shares in the U.S. tumbled over 5.2% at 1.28pm today, adding to a monthlong slide of 12%and it’s not over. This offering, aimed solely at non-U.S. investors under Regulation S, notably bypasses U.S. institutions, raising more questions than answers.
On paper, the capital raise is meant to fund R&D for smart EV tech, boost liquidity, and keep the lights on. But let’s not ignore the context: this comes just a week after a disappointing Q4 print. Nio missed both revenue and delivery targets, and its outlook for Q1 is even worse. Projected deliveries of 41,000 to 43,000 units fall miles short of the Street’s 65,000+ estimate. Revenue guidance also trails expectations by a wide margin. In short: growth is slowing, costs are rising, and the cash burn is real.
Yes, Nio needs capital to stay competitive. But this move screams weakness, not strength. The dilution is significantaround 5.4% of the company’s valueand the choice to avoid U.S. markets hints at geopolitical caution or lack of investor appetite. Management included a telling caveat: the deal is subject to market conditions, suggesting they’re aware of the chilly reception. For now, investors are bracing for more pain. The road ahead looks bumpy, and Nio’s next moves will be under a microscope.
This article first appeared on GuruFocus.