Barclays cautious on Nio (NIO) as $1B CB raise highlights liquidity needs
Barclay reiterated an Equal Weight rating on Nio Inc. (NYSE: NIO) with a 12-month price target of $8.00 on the stock after the Chinese electric vehicle maker raised $1b in convertible bonds (CB) to repay $720m in previously issued CBs that are either due or puttable in early 2024.
NIO is facing an upcoming financial obligation with a $160 million convertible bond maturing, as well as an additional $560 million convertible bond that can be put back to the company on February 1, 2024, resulting in an expected cash outflow of $720 million in February 2024. Additionally, there is another $750 million convertible bond that can be put back to the company on February 1, 2025, meaning NIO is facing the repayment of $1.5 billion within the next 18 months.
“We have highlighted our concerns around NIO’s liquidity in the past,” writes analyst Jiong Shao. “We consider this recent $1bn CB raise unlikely to be enough.”
NIO has been burning through roughly 6 billion RMB (approximately $800 million) in cash each quarter, on average, over the past five quarters. As of the end of the second quarter, they had around 30 billion RMB in cash or cash equivalents, indicating they have enough cash to sustain their operations for about five more quarters.
If the cash burn remains similar going forward, NIO may need to raise additional capital sometime in 2024.
Shares of NIO are down 3.29% in pre-market trading Thursday morning.
By Michael Elkins | [email protected]