NIO to issue $200 million worth of convertible notes to its chairman, Tencent

Shanghai (Gasgoo)- Chinese EV startup NIO announced on September 5 it would issue and sell convertible notes in an aggregate principal amount of US$200 million to the investors through a private placement.

The investors involved in the latest notes issuance are an affiliate of Tencent and Li Bin, chairman and CEO of NIO. “Tencent and Mr. Li will each subscribe for US$100 million principal amount of the convertible notes, each in two equally split tranches”, said NIO.

The placement of the notes is expected to be completed before the end of September, according to the announcement.

The transaction is to be conducted in two installments. The notes issued in the first tranche will mature in 360 days and will be convertible into Class A ordinary shares (or ADSs) of NIO at a conversion price of US$2.98 per ADS at the holder’s option from the 15th day immediately prior to maturity. It bears no interest but requires the startup to pay a premium at 2% of the principal amount at maturity

The notes issued in the second tranche will mature in three years and will be convertible into ADSs at a conversion price of US$3.12 per ADS at the holder's option from the first anniversary of the issuance date. It generates no interest as well and demands NIO to pay a premium at 6% of the principal amount at the expiring date.

NIO planned to reduce its workforce by at least 1,200 staff by the end of September, Li Bin revealed on August 22 in an internal e-mail.

It would retain roughly 7,500 staff after the cut, said Li Bin. The staff adjustment will be carried out as part of efforts to further control cost and improve the company's operation efficiency so as to concentrate resources on core businesses.

Staff to be reduced would primarily come from departments like human resources, law and finance, while the plan would have little impact on core operations such as R&D and user services.

(Photo source: NIO)

The high-profile startup has been all over the news lately. It recently denied a rumor that said NIO was ready to pull out of the New York Stock Exchange and was planning to re-going public through China's high-tech-focused science and technology innovation board (STAR Market).

In addition, it was also rumored last month to merge its autonomous driving unit with DiDi Chuxing's self-driving business, while the plan was afterwards denied by the ride-hailing giant as well.

The startup said its Q1 revenues for 2019 reached RMB1,631.2 million (US$243.1 million), plunging 52.5% from a quarter earlier. Gross margin was negative 13.4%, 13 percentage points lower than that of the fourth quarter of 2018.

It is pretty urgent for NIO to raise more capital. The EV manufacturer got RMB10 billion worth of investment on May 28 by signing a framework agreement with Beijing E-Town International Investment & Development Co.,Ltd (Beijing E-Town Capital), an investment corporation headquartered in Beijing Economic-Technological Development Area.

According to the agreement, NIO was going to set up a new entity “NIO China” at Beijing Economic-Technological Development Area and inject specific businesses and assets into the new arm. Meanwhile, Beijing E-Town Capital would pump RMB10 billion worth of cash into “NIO China” through its affiliated entities or jointly with third parties in NIO China.