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Tencent-backed EV maker guns for valuation above US$8b in IPO

Nio hopes proposed US listing would raise US$1.3 billion to fund product development

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Chinese electric vehicle (EV) start-up Nio unveiled its ES8 sport utility vehicle at the Shanghai autoshow in Shanghai in April 2017. It plans to launch the ES6 by year's end and deliver these by mid-2019.

Tokyo

NIO Inc, the Chinese electric-vehicle (EV) maker backed by Tencent Holdings Ltd, is planning a US initial public offering (IPO) that would give it a valuation topping US$8 billion, as it angles to take on the likes of Tesla Inc.

The company is aiming to raise as much as US$1.3 billion, offering 160 million American depositary shares (ADS) at US$6.25 to US$8.25 each, according to a regulatory filing in the US on Tuesday; this would give the company a market capitalisation of US$6.4 billion to US$8.5 billion.

NIO is among Chinese electric-car companies raising money to fund aggressive product development and expansion amid the auto industry's seismic shift toward alternative-power and autonomous vehicles.

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China's government is also pushing to increase the use of battery-powered cars to cut pollution and reduce dependence on imported oil, spawning a clutch of startups in the nation aiming to take on Tesla and legacy carmakers.

NIO plans to use proceeds from the offering for research and development, sales and marketing and building manufacturing facilities and the supply chain, the company said in the filing.

Shares are expected to price on Sept 11, following a roadshow that opens in Hong Kong on Wednesday, according to terms for the deal obtained by Bloomberg.

The offering has been structured to ensure voting rights remain concentrated with founder William Li and technology company Tencent.

After the IPO, Mr Li will own 14.5 per cent of the electric-car maker and have 48.3 per cent of the voting power through Class C shares.

The Class B stock owned by Tencent and related entities after the offering will represent 12.9 per cent of NIO and 21.5 per cent of the voting power, said the prospectus.

As much as 5 per cent of the ADS, each representing one Class A share, has been reserved for directors, officers, employees and other individuals associated with company, it said.

Including an over-allotment option, the IPO could raise as much as US$1.5 billion.

After meeting investors in Hong Kong on Wednesday and Thursday, the NIO management will be in Singapore on Friday, going by the deal terms.

The roadshow continues next month in London and the US. NIO's move for the US listing comes amid Tesla's plan to set up a gigafactory in Shanghai. The US company, which has a market capitalisation of US$53 billion, is among foreign car-makers trying to make inroads in the world's biggest electric-vehicle market.

NIO, formerly known as NextEV, is one of several startups to have sprouted in China after the government introduced incentives.

In January, Byton, a Nanjing-based company started by former BMW AG executives, became the first Chinese automaker to hold a large-scale unveiling at the Consumer Electronics Show in Las Vegas.

Others like WM Motor Technology Co and XPeng Motors, backed by funding from Alibaba Group Holding Ltd, are also developing new models.

Mr Li, also known as Li Bin, plans to transfer 50 million shares, accounting for about a third of the stock he owns in the company, to a trust at an "appropriate time in the future" he said in a letter included in the prospectus. He will retain voting rights to the stock, while NIO users will discuss and propose how to use "economic benefits from these shares, through certain mechanisms to be implemented in the future", he said.

NIO began selling its first vehicle, the ES8 sport utility vehicle (SUV), in December, about three years after the company was founded. Deliveries started on June 28.

The vehicle is priced at 448,000 yuan (S$90,255) before subsidies. As of Aug 28, NIO had delivered more than 1,300 ES8s and had reservations for another 15,700 more, said the prospectus.

The company plans to begin selling another electric SUV, the ES6, by the end of this year, with initial deliveries in the first half of next year.

Morgan Stanley, Goldman Sachs Group Inc and JP Morgan Chase & Co are arranging the offering, along with Bank of America Corp, Deutsche Bank AG, Citigroup Inc, Credit Suisse Group AG, UBS Group AG and Wolfe Capital. BLOOMBERG