What happened
Shares of Chinese electric car manufacturer Nio (NIO +5.59%) stock hopped 2.6% higher as of 12:45 p.m. EDT Tuesday after Bloomberg reported that Nio investors may have a second way to get rich.
Because now they're going to own a piece of Lotus Cars.
Image source: Lotus Cars.
So what
As Bloomberg advises, Lotus, the iconic British sports car maker that is majority-owned by China's Zhejiang Geely Holding Group, is raising $2.3 billion that it will use "to transform [itself] into an all-electric brand." Nio won't contribute all of the $2.3 billion, but it will contribute a piece of it -- and get a piece of Lotus in return.
In addition, Lotus' electric car division, Lotus Technology, and Nio "will explore collaboration in areas including high-end intelligent EVs."
Now what
That could become important as Geely contemplates taking Lotus public -- perhaps as soon as next year.
On the one hand, Lotus is planning to begin selling a new electric Type 132 SUV in 2022, to be followed in short order by a four-door coupe in 2023, a second SUV in 2025, and an electric Type 135 sports car in 2026. If any or all of these cars are based on technology developed by Nio, the latter could stand to reap beaucoup bucks in the form of high-margin technology licensing revenue from Lotus.
Additionally, if Lotus debuts as the $15 billion-plus initial public offering that is being contemplated, then depending on how big a piece of Lotus that Nio will receive for its investment, Nio could reap millions, or even billions, more in value from its equity interest in Lotus.
In short, there are all sorts of reasons for Nio investors to be smiling today.
