Nio (NYSE:NIO) stock received a helping hand yesterday after the Chinese electric vehicle (EV) company announced that Abu Dhabi government majority-owned fund CYVN Holdings agreed to invest $2.2 billion into the EV firm. In exchange, Nio will provide CYVN with 294 million newly issued Class A shares at a per share price of $7.50.
“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,” said founder and CEO William Li.
This investment comes after CYVN agreed to invest $738.5 million into the company back in July and also acquired $350 million worth of shares from Tencent (OTCMKTS:TCEHY).
The $2.2 billion investment is expected to close during the last week of December. Following the close, CYVN will become the largest shareholder of NIO stock.
NIO Stock: CYVN to Become Largest Nio Shareholder
CYVN will own 419 million shares of NIO stock upon the closing of the deal, equivalent to a 20.1% ownership stake. The fund will also be granted the opportunity to nominate two directors to Nio’s board as long as its stake is no less than 15% of Nio’s outstanding share capital. If CYVN’s stake is “less than 15% but more than 5%,” it will be entitled to nominate one director.
Meanwhile, Li owned 30.46 million Class A shares and 148.50 million Class C shares as of Feb. 28, which is equivalent to a 10.5% stake. At the same time, Li will still remain in charge of the company with 44.2% voting rights, as his Class C shares have “1:8 super voting rights.”
According to Reuters, CYVN’s investment into NIO stock since July will have an average price of $7.85 per share compared to the company’s initial public offering (IPO) price of $6.25 in 2018. The publication points out that cost of sales grew faster than sales during the third quarter, while net debt could exceed 6 billion yuan by the end of 2023.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
