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China's Tesla Rival NIO Raises $1 Billion in its U.S. IPO, Falls Short of Expectations

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【Summary】Chinese electric automaker NIO debuted on the New York Stock Exchange this morning, raising $1 billion with its U.S. IPO, much lower than NIO’s earlier target of $2 billion to $3 billion previously reported by The Wall Street Journal. NIO’s target would have been the largest U.S. listing to date by any Chinese automaker.

Eric Walz    Sep 12, 2018 11:22 AM PT
China's Tesla Rival NIO Raises $1 Billion in its U.S. IPO, Falls Short of Expectations
author: Eric Walz   

Chinese electric automaker NIO debuted on the New York Stock Exchange this morning, raising $1 billion with its U.S. IPO, much lower than NIO's earlier target of $2 billion to $3 billion previously reported by The Wall Street Journal. NIO's target would have been the largest U.S. listing to date by any Chinese automaker. The IPO gives NIO a $6.42 billion valuation.

NIO set the final offer price at $6.26 per American depositary receipt—just a penny over the bottom range NIO was hoping for. The company set an indicative price range of $6.25 to $8.25 per share. The automaker has yet to generate much revenue, reporting just $7 million of sales in the first half of 2018.

Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co led the deal.

The electric automaker is seen as a rival to Tesla in China and as begun deliveries of its ES8 SUV. NIO is backed by Chinese internet giant Tencent Holdings had to contend with a difficult market environment for automotive stocks, due in part to the Trump administration's escalating trade war with China and Europe and Tesla shares sliding nearly 25 percent since August.

NIO was founded by Chinese entrepreneur Bin Li in 2014. The EV startup aims to compete with Tesla in China, the world's largest car market. The company launched its first mass-produced electric vehicle, the ES8, on Dec. 16, and started deliveries on June 28. NIO said it has unfulfilled reservations for another 17,000 vehicles.

The ES8 is a seven passenger SUV with an aluminum alloy body and carries a price tag of 448,000 yuan ($65,300) before incentives. The ES8 is about half the price of a Tesla Model X in China. NIO plans to launch a second, lower-priced electric sport-utility vehicle, the ES6, by the end of this year.

The company is also well known for its EP9, a 1342 hp high-performance electric supercar. In October 2016, the NIO EP9 set a record at Germany's famed Nürburgring Nordschliefe, making it the fastest electric car in the world.

NIO faces a lukewarm automobile market in its home country. China's car sales in August dropped for the second month in a row, according to the state-backed China Association of Automobile Manufacturers. Analysts blamed the decline on a combination of market saturation and weak consumer confidence.

Meanwhile Tesla's is struggling to meet its production targets for its mass-market Model 3 and CEO Elon Musk cancelled his attempt to take Tesla private have sent its shares down 26% since August 7, the day Musk tweeted about taking the automaker private.

NIO is one of several ambitious Chinese electric-vehicle startups, dubbed the "four dragons," which all are competing to establish their presence in China and abroad. The others include Xiaopeng Motors, also known as Xpeng; Weltmeister Motor, known as WM Motor; and Future Mobility Corporation, which goes by the name Byton.

The companies have all been founded within the past four years, and they have attracted investments from some of China's biggest tech giants, including Alibaba Group, Tencent Holdings and Baidu.

NIO is based in Shanghai with its U.S. headquarters and software development center based in Silicon Valley.

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