NIO Stock: Why Nio Shares Are Plunging Today

Shares of Nio (NYSE:NIO) are dropping on Monday morning after the China-based electric vehicle manufacturer increased the size of a NIO stock secondary offering by 13% and priced it at a discount.

A Nio (NIO) sign outside of the company's facilities in Shanghai, China.
Source: Andy Feng /

The company said it raised $2.65 billion in an offering of 68 million American depositary shares (ADS), which were priced at $39 a piece and 7.1% below the Dec. 11 closing price of $41.98.

The decline isn’t much of a surprise to investors who’ve been watching NIO stock in recent days. On Dec. 10, NIO stock took a turn south after announcing the secondary along with news that underwriters would get a 30-day option to purchase an extra 9 million ADSs. The dilution spooked shareholders, likely leading to the drop in the share price.

Information Light

Another factor in the decline could be the dearth of information in Nio’s communication around the secondary. In its press release last week, the EV maker said it will use proceeds for research and development, including for its next-generation autonomous driving platform.

Importantly though, the press release offered very little detail beyond that. Nio already has $2.8 billion on its balance sheet. That has left investors wondering where exactly will the new money go.

The answers may not come until next month, when management appears at Nio Day, the hotly anticipated event where investors expect the company to share updates on its new vehicles, as well as its self-driving platform.

Should you wait for that big event before making any NIO stock moves? The shares have been hot and may just need to cool off a bit more before investors jump back in.

On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.

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