Abu Dhabi’s CYVN Holdings LLC is set to expand its stake in Chinese electric vehicle (EV) manufacturer Nio (NYSE: NIO) to approximately 20 percent with its latest investment, following a previous investment of around $1.1 billion in July.
In the latest development, Nio has secured additional funding from CYVN, a government fund from Abu Dhabi. According to a statement, CYVN will invest a total of $2.2 billion in cash to subscribe for 294 million newly issued shares of Nio’s class A ordinary shares at $7.50 per share. This investment agreement, part of a share subscription arrangement, is facilitated through CYVN Investments RSC Ltd, an affiliate of CYVN.
After a strategic equity investment of $738.5 million in July, CYVN held about 7.0 percent of Nio’s total outstanding shares. With the latest investment, CYVN is poised to beneficially own about 20.1 percent of the total issued and outstanding shares of Nio.
The December investment transaction is subject to customary closing conditions and is expected to conclude in the last week of December. Both CYVN and Nio are subject to specific lock-up arrangements for six months after the transaction’s closing.
Post-closure, CYVN will have the right to nominate two directors to Nio’s board as long as it owns not less than 15 percent of the company’s issued share capital. If CYVN’s ownership falls below 15 percent but remains above 5 percent, it retains the right to nominate one director.
Following the investment, Nio and CYVN, along with its subsidiaries, plan to continue collaborating on strategic and technical initiatives in international markets.
William Li, Nio’s founder, chairman, and CEO, expressed appreciation for CYVN’s endorsement of Nio’s values and vision to accelerate the global transition to sustainability. With the strengthened balance sheet, Nio aims to enhance brand positioning, boost sales and service capabilities, and invest in core technologies to navigate the competitive landscape.
CYVN views this increased investment as a continuation of its strategy in the mobility space, showcasing confidence in Nio’s unique positioning and competitiveness in the global smart EV industry. The investment solidifies CYVN’s commitment to being a long-term strategic partner of Nio, supporting its innovation, technological breakthroughs, and international expansion efforts.
Nio faced challenges earlier in the year with weak deliveries, impacting its financials. However, improved deliveries in the second half of the year led to a stronger financial position in the third quarter. Nio implemented measures such as reducing positions in November to enhance efficiency and cut costs.
In further developments, Reuters reported on December 6 that Nio plans to spin off its battery manufacturing unit, aiming for faster profitability. This strategic move aligns with Nio’s efforts to optimize resource efficiency and prioritize investments that contribute to the company’s financial performance over the next three years.
The announcement follows Li’s statement during Nio’s third-quarter earnings call that manufacturing batteries in-house wouldn’t contribute to improving gross margins within the next three years. Consequently, Nio has opted for alternative strategies.
In the upcoming year, Nio has decided against introducing new models and will instead concentrate on marketing its existing lineup of eight models, as previously communicated by Li.
Nio has scheduled the reveal of its flagship sedan, the ET9, at Nio Day 2023 on December 23. Past statements from company executives have suggested that deliveries of the ET9 may not commence until 2025.
