Nio’s shares gain on $2.2bn investment from Abu Dhabi-backed company

The shares of Chinese electric car maker Nio have gained over the past week, boosted by news of a cash injection from the Middle East.

Nio’s shares were up 5.3 per cent on the Hong Kong Stock Exchange on Wednesday after gaining about 21 per cent since last Wednesday.

The company’s New York-listed stock closed 5.63 per cent higher at $8.82 on Tuesday.

Earlier on Monday, Nio said it signed an agreement for an investment of $2.2 billion from CYVN Holdings, an investment entity backed by Abu Dhabi.

The deal, which will close this month, is expected to take CYVN’s shareholding to 20.1 per cent of Nio’s total issued and outstanding shares, and followed an investment of $1 billion in July.

CYVN will subscribe to 294,000,000 newly issued Class A ordinary shares priced at $7.50 each and will also be entitled to nominate two directors to Nio’s board, the company said.

“This is great news for the company on an operational basis as it reduces the risk of capital running out substantially,” Jonathan Weber, an analyst at Seeking Alpha, said this week.

“But on the other hand, this causes significant dilution, and management’s willingness to sell shares at a rather low price might indicate that Nio is trading ahead of fair value today.”

The deal comes against the backdrop of rising competition, with major car makers, including market leader Tesla, cutting electric vehicle prices to boost sales.

The car industry is also capital intensive, which means start-ups such as Nio end up spending more money than they make from sales in the short term.

Nio’s net loss in the third quarter narrowed to about $644 million, compared with a loss of about $856 million in the second quarter.

However, the company’s revenue more than doubled to $2.69 billion during the same period.