Nio raises $1 billion in new debt and shares fall 10.4% By Investing… – Investing.com

Chinese electric vehicle maker Nio (NYSE:NIO) saw a 10.4% drop in its market capitalization on Tuesday, following the announcement of its intention to raise funds through the issuance of convertible senior notes. The company’s decision to acquire $1 billion in new debt is intended to offset its still-negative free cash flow.

Nio intends to issue $500 million worth of convertible senior notes due 2029 and an additional $500 million of the same amount due 2030. Additionally, the company disclosed an over-allotment option that could potentially increase the total new debt at $1.15 billion. These convertible notes can be converted into Nio shares, a move that could result in dilution for existing shareholders.

The move comes against the backdrop of Nio’s financial performance last year, where it posted losses of $2.1 billion and negative free cash flow of $1.6 billion. The company is not expected to reach profitability until 2027, according to S&P Global Market Intelligence.

The funds raised through the new debt issuance will be used in part to repay existing debt, with the remaining funds intended to strengthen the company’s balance sheet position, as reported by Yahoo! Finance.

However, this strategy doesn’t solve Nio’s underlying problem: generating profits from its electric car sales. Unless a solution is found to this fundamental problem, investors could expect further debt offerings and possible market sell-offs in the future.

This article was generated with the support of AI and reviewed by an editor. For more information, consult our General Terms and Conditions.

Chinese electric vehicle maker Nio (NYSE:NIO) saw a 10.4% drop in its market capitalization on Tuesday, following the announcement of its intention to raise funds through the issuance of convertible senior notes. The company’s decision to acquire $1 billion in new debt is intended to offset its still-negative free cash flow.

Nio intends to issue $500 million worth of convertible senior notes due 2029 and an additional $500 million of the same amount due 2030. Additionally, the company disclosed an over-allotment option that could potentially increase the total new debt at $1.15 billion. These convertible notes can be converted into Nio shares, a move that could result in dilution for existing shareholders.

The move comes against the backdrop of Nio’s financial performance last year, where it posted losses of $2.1 billion and negative free cash flow of $1.6 billion. The company is not expected to reach profitability until 2027, according to S&P Global Market Intelligence.

The funds raised through the new debt issuance will be used in part to repay existing debt, with the remaining funds intended to strengthen the company’s balance sheet position, as reported by Yahoo! Finance.

However, this strategy doesn’t solve Nio’s underlying problem: generating profits from its electric car sales. Unless a solution is found to this fundamental problem, investors could expect further debt offerings and possible market sell-offs in the future.

This article was generated with the support of AI and reviewed by an editor. For more information, consult our General Terms and Conditions.