NIO Stock is Rapidly Declining, But What Is The Reason?

NIO stock
NIO Stock

NIO stock has been quickly dropping since the company has shared its plans of offering a massive 60 million of the shares of the American Depository.

In recent tough times, the electric vehicle enterprise of Chinese origin, Nio (NYSE: NIO) has started to turn around things on the stock market as of 10th December, Thursday. The company stock has concluded its regular trading on Thursday at a 2.75% higher rate than usual. Nonetheless, what is the expectation of the investors?

NIO Stock Valuation

Nio has announced their offer of an additional 60 million shares of the American Depository (ADS). Along with this, they have also declared that they will be granted the underwriters an option of 30 days to buy an additional 9 million from ADS.

In this manner, the stock of the company has made a downhill journey. Although this is not so surprising owing to the tendency of the investors to panic after getting the news regarding this additional offering. The real thing is it will weaken the existing shareholders since Nio will add 60 million more shares into the stock market. As expected, this will lead to the decline of the short term share prices.

The adverse reactions on the evening on Thursday are due to the reason that investors only desire more information and transparency regarding this offering. During the press statement, the company stated that they will be utilizing the proceeds for the purpose of research and development. Along with this, they will invest the proceeds for the development of the autonomous platform of next-generation driving since the Q3 earnings are being used for self-driving vehicles from 2021.

The balance sheet of NIO stock shows $2.8 billion which is another reason for the negative reaction.