Nio's stock turns briefly positive after more than $1 billion investment from Abu Dhabi fund

By Tomi Kilgore

Nio's stock still falls amid growing investor concerns over China's economy

The U.S.-listed shares of Nio Inc. bounced briefly into positive territory Tuesday, after the China-based electric vehicle maker announced an investment of more than $1 billion by an investment fund majority owned by the Abu Dhabi government.

Nio said CYVN Holdings LLC has entered into a share subscription agreement in which the fund will invest a total of $738.5 million in cash to own about 84.70 million newly issued shares of Nio (NIO) at a purchase price of $8.72. The closing of the agreement is expected to take place in early July.

Nio also said it was "aware" that CYVN has entered into a share purchase agreement with an affiliate of Tencent Holdings Ltd. to buy about 40.14 million shares of Nio owned by Tencent.

Once the two agreements close, CYVN will own about 7.0% of Nio's outstanding shares. The fund will also be entitled to nominate one member of Nio's board of directors.

Based on current prices, the total number of shares CYVN is acquiring would be valued at about $1.15 billion.

Nio's stock initially dipped in premarket trading following the CYVN investment announcement, as the share purchase price from the company represented a 7.2% discount to Friday's closing price of $9.40. It then bounced to be up as much as 0.1% at an intraday high of $9.41, before pulling back into negative territory.

The stock was down 1.1% in afternoon trading, paring a premarket loss of as much as 5.4%, amid growing concerns about China's economy.

On Monday, while U.S. markets were closed for the Juneteenth holiday, Goldman Sachs cut its growth outlook for China's economy to 5.4% from 6%, citing a second-straight month of weak data and growing concerns that China's government isn't working fast enough to stimulate the economy. That growth downgrade comes as week after UBS lowered its growth outlook to 5.2% from 5.7% and J.P. Morgan dropped its outlook to 5.5% from 5.9%.

Also read: Blinken, Xi pledge to stabilize deteriorating ties, but China rebuffs main U.S. request.

Nio's stock weakness comes as the Invesco Golden Dragon exchange-traded fund (PGJ), which tracks the American depositary shares of companies based in China, excluding Hong Kong, slumped 5.1%, with 52 of 63 equity components losing ground. In comparison, the S&P 500 index slipped 0.3% on Tuesday.

Among other China-based EV makers, shares of Xpeng Inc. (XPEV) dropped 4.7% and Li Auto Inc.'s stock (LI) gave up 1.4%.

Shares of Tesla Inc. (TSLA), which generated 21% of its total first-quarter revenue from China, advanced 4.0%.

-Tomi Kilgore

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06-20-23 1330ET

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