2018 US$1.8B IPO at NYSE
Nio is China's answer to Tesla. It manufactures electric vehicles (EV) and is in the process of building and testing electric autonomous vehicles.
Nio's path has not been easy and its future is not assured. By the time it IPO it had only produced a few hundred EVs. It has yet to muster production and distribution challenges. Nio is a startup manufacturer which faces competition from a number of smaller Chinese EV makers and Tesla who has the biggest market share and a matured EV car producer. Nio meets Tesla head-on by massive discount, sometimes at 30%. This bites deeply into gross margins. China's EV market has been driven by government subsidy for NEVs (new energy vehicles). The subsidy has been reduced in April 2020 and sales are expected to hurt.
Looking at the review info above, the investment does'nt seem like a good idea. Looking at the price charts, the divestments seem to be a real case of bad timing. Singaporeans will prefer to call it jinxed timing.
Warren Buffet did'nt put a single dollar into extremely risky start up EV manufacturers. Instead, he bought up a 25% share of BYD, a Chinese battery manufacturer and EV seller. He is sitting happily on very good gains and a sustainable stock.
Nio has a very high cash burn rate and is running low on liquidity. It chalked up US$5B losses in 5 years, compared to Tesla which lost the same amount in their first 15 years. Post IPO Nio had to depend on cash injection from private parties. In May 2019 it received US$1.45B from E-Town Capital, a Beijing-owned fund. It is now basically a joint venture with the state fund.
The AA of China estimated only 4% of China’s overall 23.7 million passenger vehicle unit sales is EV. The volume is not large enough for the many players currently in the market. In motor vehicle production, big volumes are required just to support the tooling costs for each model.
Nio IPO in NYSE at US$6.26 and has been a laggard for the most part, with prices slipping to a frightening low of US$1.51. In Q3 of 2020 there was relief as prices climbed above US$10 for the first time. Analyst pointed to the record deliveries of almost 5,000 as the reason for return of confidence. Some see this a positive turning point, despite all the negativities. However, I think Nio's stock uptick in Q3 is just a sympathy move in the wake of the explosive jump in Tesla's price. From US$668 in Feb 2020, it increased by 200% to US$2,006 on 20 Aug 2020. There is absolutely no reason for this price movement other than a bubble building up. When this bubble poops and Tesla's price returns to sanity, Nio's price will tank. Tesla will inevitably go for a stock split. After this, let's watch how this tulipmania will end.
Temasek snapped up 5.4% of the Nio equity on IPO (41,446,985 x US$6.26 = US$259,458,126). Supposedly a long term investor, the quick and sharp drop in share price must have spooked the folks in Temasek. In Q1, 2020 Temasek disposed off 27,462,868 shares. Then in Q2, 2020 it sold another 10,875,592. Based on rough average price of US$3.766 for Q1 and US$6.04 in Q2 there was a realised loss of possibly US$71M within record time of 15 months.
As at 30 Jun 2020 the balance of shares was 3,108,525 with an unrealised gains of US$24M. If Temasek sees upside value given what's happening in the NYSE and hang on to the stock, it will need Nio to climb to about US$29.10 for the investment to break even. In the very short term, a 100% jump from current levels is a crazy possibility as investors who missed out on Tesla's bonanza turn to Nio. Question is, is Temasek running an investment portfolio or a gambling joint?
The AA of China estimated only 4% of China’s overall 23.7 million passenger vehicle unit sales is EV. The volume is not large enough for the many players currently in the market. In motor vehicle production, big volumes are required just to support the tooling costs for each model.
Nio IPO in NYSE at US$6.26 and has been a laggard for the most part, with prices slipping to a frightening low of US$1.51. In Q3 of 2020 there was relief as prices climbed above US$10 for the first time. Analyst pointed to the record deliveries of almost 5,000 as the reason for return of confidence. Some see this a positive turning point, despite all the negativities. However, I think Nio's stock uptick in Q3 is just a sympathy move in the wake of the explosive jump in Tesla's price. From US$668 in Feb 2020, it increased by 200% to US$2,006 on 20 Aug 2020. There is absolutely no reason for this price movement other than a bubble building up. When this bubble poops and Tesla's price returns to sanity, Nio's price will tank. Tesla will inevitably go for a stock split. After this, let's watch how this tulipmania will end.
Temasek snapped up 5.4% of the Nio equity on IPO (41,446,985 x US$6.26 = US$259,458,126). Supposedly a long term investor, the quick and sharp drop in share price must have spooked the folks in Temasek. In Q1, 2020 Temasek disposed off 27,462,868 shares. Then in Q2, 2020 it sold another 10,875,592. Based on rough average price of US$3.766 for Q1 and US$6.04 in Q2 there was a realised loss of possibly US$71M within record time of 15 months.
As at 30 Jun 2020 the balance of shares was 3,108,525 with an unrealised gains of US$24M. If Temasek sees upside value given what's happening in the NYSE and hang on to the stock, it will need Nio to climb to about US$29.10 for the investment to break even. In the very short term, a 100% jump from current levels is a crazy possibility as investors who missed out on Tesla's bonanza turn to Nio. Question is, is Temasek running an investment portfolio or a gambling joint?
Warren Buffet did'nt put a single dollar into extremely risky start up EV manufacturers. Instead, he bought up a 25% share of BYD, a Chinese battery manufacturer and EV seller. He is sitting happily on very good gains and a sustainable stock.
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