Timing is very important in the IPO market because of the sensitivity of IPOs in general. When sentiment is bullish in the broader stock market and that IPO's particular sector and industry, the odds of a strong pricing are favorable, and vice versa. Therefore, it doesn't come as much of a surprise that demand for NIO's IPO was tepid.
Specifically, its 160 mln share deal priced at $6.26, the low end of the $6.25-$8.25 expected range. In all, the deal raised just over $1.0 bln in total gross proceeds. The deal was led by tier one firms Morgan Stanley, Goldman Sachs, and JP Morgan, which probably helped the IPO at least price within expectations.
Shares are slated to open for trading later this morning on the NYSE.
NIO is a manufacturer and marketer of smart and connected premium electric vehicles that utilize next generation technologies in connectivity, autonomous driving, and artificial intelligence. Its first model, the EP9, was introduced in 2016. At the time, it set a world record as the fastest all-electric car. NIO says the EP9 offers best-in-class electric powertrain technology, helping position it as a premium brand. The electric powertrain technologies it developed for the EP9 set the technological foundation for the development of its current vehicle line.
Then, on December 16, 2017, NIO launched its first volume manufactured electric vehicle, the ES8, and began making deliveries on June 28, 2018. The ES8 is a 7-seater all aluminum alloy body, premium electric SUV that is equipped with its proprietary electric powertrain system, which is capable of accelerating from 0 to 100 km per hour in 4.4 seconds. As of August 31, 2018, NIO had delivered 1,602 ES8s and had unfulfilled reservations for 15,778 ES8s with deposits. Of these reservations, 6,201 consisted of reservations for which non-refundable RMB45,000 deposits had been made and 9,577 consisted of reservations for which only an initial fully refundable deposit of RMB5,000 had been made.
NIO plans to launch its second volume manufactured electric vehicle, the ES6, by the end of 2018 and start initial deliveries in the first half of 2019.The ES6 is a 5-seater, high-performance premium electric SUV, set at a lower price point than the ES8 to target a broader customer base.
For the six months that ended June 30, 2018, NIO generated net revenue of RMB46.0 mln ($7.0 mln), as it began making deliveries of its ES8 vehicles. Comparatively, the company did not generate any revenue for the same period in 2017. Cost of sales were RMB(199.2) mln, far exceeding its revenue, consisting of parts and materials, compensation costs to JAC (its co-manufacturer) for its operating losses incurred, manufacturing overhead, and labor costs.
Moving down the income statement, Research & Development jumped by 41.5% to RMB 1.03 bln and SG&A expenses surged by 79% to RMB964.4 mln.
The above led to a very sizable operating loss of RMB(3.34) bln or $504.6 mln.