NIO Announces Terms Of Convertible Note Issuance; Notes Dilute Existing Holders By 6% Above Market Price

Chinese luxury EV maker NIO Inc. NIO detailed Wednesday the terms and pricing of its previously-announced $1 billion in new convertible debt:

• Two $500 million tranches of 2029 and 2030 notes will be issued with interest rates of 3.875% and 4.625%, respectively
• The notes will include an option offering purchasers the right to purchase an additional $75 million of each of the notes within 30 days of the offering  
• The interest payments will be made semiannually on April and October 15
• The notes will convert at $11.12 for each of the note tranches, which is approximately 25% higher than Tuesday’s closing price
• The financing is expected to close around September 22. 2023
• The refinancing upon conversion will add another 103,463,775 shares to the total 1.8 billion shares in issue, representing dilution for shareholders of 5.8%

The announcement of the new debt financing Monday sent the stock price of NIO diving around 20% since as uncertainty surrounded the pricing of the notes.

The company’s management said on a Q2 earnings call in August that it would be refinancing its balance sheet in order to boost margins and cover sales costs related to the hiring of a new sales team that it has poached from competing automakers around China with existing sales networks. It said that forward margin guidance was for the company to return to double-digit profit margins by year-end. See the full story here.

Shares in NIO were bouncing back in pre-market trading Tuesday morning on the announcement of the refinancing terms of the convertible notes.