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Why NIO Stock Is Up Sharply Today

By John Rosevear - May 26, 2020 at 12:51PM

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Sales appear strong ahead of earnings.

What happened

Shares of Chinese electric-vehicle maker NIO (NIO 3.84%) were up on Tuesday, on signs of strong demand for its vehicles ahead of its earnings report later this week.

As of 1:30 p.m. EDT, NIO's American depositary shares were trading up about 13.8% from Friday's closing price. 

So what

With the COVID-19 outbreak receding in China, demand seems to be strong for NIO's upscale electric vehicles -- even without dealer visits. China Daily reported that a 40-minute NIO livestream last week, in which CEO William Bin Li presented the company's vehicles in detail and answered questions, led to 320 vehicle orders, 5,288 test-drive appointments, and total sales of 150 million yuan ($21 million) by the next day. 

A NIO ES8, a 7-passenger upscale electric SUV.

NIO's revamped ES8 has more range and a slew of new features. Image source: NIO.

The report fed into growing investor excitement around NIO, which secured what appears to be a long-term funding deal last month. The deal, with economic-development authorities in China's Anhui province, will provide NIO with 7 billion yuan ($981 million) in new funding in exchange for a 24.1% stake and an agreement to move NIO's operations to Anhui's capital city, Hefei. 

Now what

Auto investors still have some big questions related to the structure of NIO's deal with authorities in Anhui. The parties are creating a new company into which NIO will put most or all of its assets in China in exchange for a 75.9% stake. But it's not clear what will will happen to NIO's debt -- or exactly what its U.S. shareholders will own once the transaction is completed.

The good news is that more information, and (hopefully) answers to those and other questions, should be forthcoming when NIO reports its first-quarter earnings before the market opens on Thursday, May 28.

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