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Nio stock crashes wiping $1.5 billion in a day; What’s happened?

Nio stock crashes wiping $1.5 billion in a day; What's happened?

For the past month, Nio Inc.’s (NYSE: NIO) stock had been treading a remarkably stable path in the turbulent waters of the stock market

However, the tranquility was shattered on September 19 when the electric vehicle (EV) manufacturer experienced a sudden and dramatic drop of over 17%, erasing approximately $1.5 billion in market value in a single trading session.

Nio’s Hong Kong-listed shares also declined sharply, losing nearly 12% on the day.

Why is NIO stock plummeting?

Nio’s steep downturn on Tuesday, September 19, came after the Chinese automaker said it plans to raise $1 billion through a convertible bond offering.

In particular, the company is looking to raise $500 million via the issuance of convertible senior notes due 2019, followed by another $500 million tranche due 2030. Nio said it would pay coupons of 3.875% and 4.625% for the two offerings, respectively.

These figures represent a higher rate than what Nio has paid on its previous bond issuances. According to the reports, the company intends to use a part of the proceeds to purchase and cancel $500 million in 2026 convertible bonds, on which it pays coupons of 0.00% and 0.50%. 

The other portion of the proceeds will mainly be used for general corporate needs and strengthening the company’s balance sheet. 

Nio’s decision to issue convertible bonds caused a stock price drop because these notes can be converted into shares and potentially dilute the holdings of existing investors. 

The EV manufacturer said the initial conversion rate of the new notes represents a premium of roughly 30% to the last closing price of its US-listed shares. 

Nio stock price analysis

Nio’s US shares were standing at $8.55 at the time of writing, down 17.07% in the past 24 hours, marking the worst percent decrease in a year.  

The drop erased around $1.5 billion off Nio’s market capitalization, which now sits at $15.4 billion. 

NIO 1-day price chart. Source: Finbold

With the latest move, NIO stock price has further fallen below the two important support levels located at around $13 and $11.3, with both still acting as resistance in case the bulls manage to turn things around. 

On the upside, the EV stock bulls must first clear the confluence of strong resistance thresholds in the context of 100-day moving and 200-day moving averages (MAs) in the area between $10 and $10.2.

On the downside, NIO faces near-term support at around $8.04. A daily close below this zone could pave the way for further declines toward 3-year support at $6.97.

Over the past week, NIO lost about 16.5% of its value, and more than 21% on a monthly basis. 

Year-to-date, the stock is down 16.2%. 

EV price war takes a toll on Nio

The Hefei, China-based automotive company, was one of the main victims of a price war that occurred in the mainland earlier this year after leaving the prices of its premium electric cars nearly unchanged. 

At the end of August, Nio reported its net loss for Q2 widened by 27.8% year-over-year to 6.1 billion yuan ($836 million), while revenue fell 14.8% to $1.2 billion. 

However, Nio remained optimistic about its future outlook, saying it expects to deliver between 55,000 and 57,000 vehicles to Chinese customers in the period from July to September, which would mark a year-on-year increase of at least 74%. 

Meanwhile, the company began taking orders for its new EC6 coupe SUV earlier this month, thereby completing an upgrade of all its older vehicles. 

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