Shares in Chinese electric vehicle (EV) maker Nio (NYSE:NIO) jumped 8.5% over the weekend after it secured a $2.2 billion strategic investment from CYVN, controlled by the government of Abu Dhabi of the United Arab Emirates.
The deal gives Abu Dhabi a 20% stake in Nio.
Abu Dhabi is buying 294 million new shares at $7.50 each. NIO stock opened at $8.59/share. Nio’s market capitalization is now about $15.4 billion.
Abu Dhabi Doubles Down on EVs
In July, CYVN invested $738.5 million in Nio and bought $350 million more NIO shares from a unit of Tencent Holdings (OTCMKTS:TCEHY). CYVN will now have the right to select two members of the Nio board so long as it maintains a 15% stake. Nio’s board presently has seven members, including James Gordon Mitchell from Tencent.
Nio ended September with $3.3 billion in cash. It lost $634 million, 37 cents per share, on revenue of $2.6 billion during the third quarter after delivering 55,432 electric cars.
Nio has been gearing up for an export push in Europe. This will include battery-swap stations and a new brand called Firefly, cars costing about $25,000. The company is still debating whether it will enter the U.S. market in 2025 or later.
Abu Dhabi is not the only Middle Eastern entity getting into electric cars. Saudi Arabia’s Public Investment Fund (PIF) holds a majority stake in Lucid Motors (NASDAQ:LCID), as well as stakes in Aston Martin (OTCMKTS:AMGDF) and a Chinese brand, Human Horizons.
Nio has been the weakest of the three main Chinese EV companies traded in New York this year. NIO stock is down 18% in 2023. Rival XPeng (NASDAQ:XPEV) is up 45%, and Li Auto (NASDAQ:LI), known for plug-in hybrids, is up 73%.
NIO Stock: What Happens Next?
Nio should now have adequate capital to launch Firefly and complete its export push into Europe. How well it does now is up to buyers there.
As of this writing, Dana Blankenhorn 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.
