What seemed to be a dream coming true for many NIO investors soon became a nightmare in the shape of stock dilution.
Late Thursday NIO Inc announced that they are about to bank on the recent stock rally. NIO Inc. (NYSE: NIO) yesterday announced the commencement of the offering of 75,000,000 American depositary shares (the “ADSs”), each representing one Class A ordinary share of the Company . The Company intends to grant the underwriters in the ADS Offering a 30-day option to purchase up to an additional 11,250,000 ADSs.
The Company plans to use the net proceeds from the ADS Offering mainly for share buybacks in China and for research and “development in autonomous driving technologies, global market development and general corporate purposes”.
So, basically, NIO is using the success at the New York stock exchange to strengthen their position in China.
But the good news might come today during the trading session. The additional shares are issued at spot price, which is the market close price on Aug 26 at $20.44. If the take up is full in spite of no discount on these shares, then the institutional investors are bullish about Nio and the surge may continue from there.
Anyway, on this news NIO stock lost almost 4% of its value in the pre-market session on Friday, on top of 2.74% already lost on Thursday. Is this just a minor blip or long term mistake?