<p>There is a chance that Nine (NYSE: NIO) stocks can survive after all. I was not a believer for a while. The Chinese electric car company almost ran out of cash last year. I have written several articles on this topic for InvestorPlace.
Source: THINK A / Shutterstock.com
On March 5, Nio announced that it had signed final agreements with several non-affiliated Asia-based investment funds. The agreements would raise $ 235 million. The funds raised relate to short-term convertible banknotes.
More importantly, the company said the deal would close on March 11, 2020.
There was no follow-up press release on March 11, stating that the deal was closed. But this is equal to the course with Nine. It is common for most other companies to mark closures.
In addition, on February 25, Nio secured some form of funding from the local Hefei government in China. The Hefei government expects to provide resources and financial support to the company in Hefei.
The size of the funding was not announced, so this was a bit unclear. Nine undertook to maintain its headquarters in Hefei as a result.
Intel may need Nine to survive
I also suspect that Intel (NASDAQ: INTC), which owns Mobileye, has an interest in ensuring its survival. Mobileye signed a “strategic partnership” with Nio in November 2019 to make highly automated and autonomous vehicles (AV).
These AV devices will be used for consumer markets in China and other markets. The carmaker will integrate Mobileye’s L4 self-driving system for the AV consumer market. The launch is aimed at 2022. It is the first such deal for Mobileye.
For example, Mobileye will buy an exclusive robot taxi variant to be used for its own robot taxi fleet. The agreement is the first large-scale car manufacturing partner to supply vehicles to Mobileye.
In fact, Intel can not effectively allow Mobileye’s Nine investment to crumble. This is possibly one of the reasons why the Asian funds were probably willing to finance the company in the short term.
In addition, a Seeking Alpha author recently wrote an article about the Mobileye deal with Nio. He says it makes an excellent argument against those who short-circuit Nine shares.
What should investors in nine shares do?
Nine released their results for 2019 on March 18. According to its income statement, “The balance between cash and cash equivalents, limited cash and current investments was RMB 1,056.3 million (MUSD 151.7) as of December 31, 2019. The company’s cash balance is not sufficient to provide the necessary working capital and liquidity for continuous operation for the next 12 months.
Wei Feng, NIO’s CFO, said in the announcement: “We made several private placements of convertible banknotes in February and March 2020, for a total principal amount of US $ 435 million, which supported our day-to-day operations and business development. On February 25, 2020, we entered into a framework agreement for cooperation with the municipal government of Hefei, Anhui Province, which expects to provide resources and financial support to NIO to establish the NIO China headquarters in Hefei for our long-term growth. The parties are working on the legally binding final documents to be signed. ”
Due to the lack of more concrete details about the agreement with Hefei, investors must decide for themselves whether they believe that Nio shares are likely to survive without going bankrupt or insolvent. As mentioned, I have previously written about this possibility.
At the time of writing, Mark Hake, CFA holds no position in any of the above securities. Mark Hake runs the Total Yield Value Guide which you can review here. The guide focuses on high total return values. Subscribers get a free trial period of two weeks.