Saturday, March, 28, 2020 04:40:45

NIO Inc., a U.S.-listed electric car manufacturer in China, is close to securing a $1.4 billion funding from the municipal government of Hefei, China’s Anhui Province. The preliminary agreement of the fundraising was made in exchange to establish the company’s headquarters in China, to expand operations and deepen relationship with local business partners in Hefei. However, details on how the funding will be structured are yet unclear.

NIO, which was founded by William Li, has faced similar agreements in the past, which failed to materialize. For instance, in 2019, the Chinese electric car company announced an investment from Beijing E-Town, a state-backed company, valued at a similar amount as the recent funding. However, despite recent surges in shares, the company is yet to receive the sum. Additionally, there was a report from the Chinese media about a $1 billion funding from Guangzhou Automobile, which later turned out to be a final sum of only $150 million.

However, the recent agreement can be considered as a more promising immediate and long-term pillar of support. It reportedly has more credibility, partly because the investment is built on the company’s existing relationship as a manufacturing partner with JAC Motors, a state-owned automobile and commercial vehicle manufacturer, based in Hefei, Anhui. JAC’s chairman and local officials apparently attended the signing ceremony and provided some credibility to the funding deal.

Sources familiar with the matter stated that the funding might result in Hefei government holding a significant share of the company, which will affect cash flow and future revenues shares of the existing shareholders. The recent fundraising deal is nonetheless anticipated to pave the way to smoother operations for the company.

The recent funding amount is equivalent to around one third of NIO’s existing market cap. The company’s share rose by 13.4%, following the disclosure of the funding news.

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https://www.reuters.com/article/us-nio-funding-electric-breakingviews/breakingviews-nios-14-bln-lifeline-may-pave-a-smoother-road-idUSKCN20K0OX?utm_medium=Social&utm_source=twitter