Nio Shares Sell Off On Potential Profit-Taking, Coronavirus Scare

Just when it looked like Chinese electric vehicle maker Nio Inc – ADR NIO was enroute to redemption, shares took a step back.

Sales resurgence in the second half of 2019, cost cuts implemented to preserve cash and news of potential funding along with an improvement in macro fundamentals helped the stock break out of the rut since the start of 2020.
The stock rose to a high of $5.65 last week, riding on these multiple catalysts only to give back some of the gains by the end of the week.

Profit Taking Setting In?

Despite a lack of any company-specific news, Nio shares are pulling back sharply Monday. The retreat could be due to profit taking by jittery investors, who scramble to cash in following the recent advance.

With no further updates on funding plans, investors apparently are getting uneasy about the company's precarious cash position, which sat at a measly $274.3 million by the end of the third quarter.

For an investment-heavy company such as Nio, this paltry cash position could pose a grave threat for its ability to remain a going concern. Reports recently suggested the company is planning to set up 200 brick-and-mortar stores in 2020, comprising Nio Houses and Nio Spaces, which would likely increase investment needs.

The Wuhan coronavirus scare could not have come at a worse time. The company is just beginning to pick up its shreds, having seen some green shoots in terms of sales.

The virus threat is likely to hurt the domestic economy by way of impeding growth and hurting consumer sentiment, both of which are key for keeping Nio from running out of fuel.

Nio shares were tumbling 13.3% to $4.04 at time of publication.

Source: Yahoo Finance