Nio's Hong Kong Shares Fall After Convertible Bond Issuance

Nio, the Chinese electric-vehicle maker, experienced a decline in Hong Kong shares during early Asia trading on Wednesday. This drop was in response to a decrease in U.S.-listed depository shares after the company announced its plan to raise $1 billion through an issuance of convertible bonds.

Share Prices:
Nio's shares in Hong Kong and Singapore fell by 13% and 11%, respectively. Additionally, ADSs closed 17% lower in U.S. trade on Tuesday.

To secure the necessary funds, Nio will be raising $500 million through the issuance of convertible senior notes due in 2029 and another $500 million through a separate tranche due in 2030. The company revealed on Wednesday morning that it intends to pay coupons of 3.875% and 4.625% for each tranche, respectively.

Higher Interest Rate:
The interest rate Nio is offering for these convertible bonds is higher compared to some of its previous issuances. As part of its plans, the proceeds from this issuance will be used to buy and cancel $500 million worth of 2026 convertible notes, which currently have coupons of 0.00% and 0.50%.

Furthermore, a significant portion of the remaining proceeds will be allocated towards general corporate needs and strengthening the company's balance sheet.

Impact on Share Price:
The decline in Nio's share price can be attributed, at least in part, to the fact that these bonds can be converted into shares. This possibility has led to concerns about potential dilution of existing shareholders' holdings. Nio stated that the initial conversion rate for the new notes represents a premium of approximately 30% compared to the last closing price of its ADSs.