NIO Stock Price Falls 4.04% This Past Week: Why It Happened

By Amit Chowdhry ● Dec 2, 2020
  • The stock price of Nio Inc (NYSE: NIO) has fallen 4.04% this past week. These are some of the reasons why it happened and some reasons why the stock price is expected to keep growing this month.

The stock price of Nio Inc (NYSE: NIO) has fallen 4.04% this past week. These are some of the reasons why it happened and some reasons why the stock price is expected to keep growing this month. There are several reasons why the drop in price likely happened and why the price is likely going to increase this month.

Negative Trigger: Reaction To “Holding Foreign Companies Accountable Act” Update

Later this evening, the the U.S. House of Representatives was scheduled to vote on the “The Holding Foreign Companies Accountable Act” — which would prevent securities of foreign companies from being listed on any U.S. exchange if it fail to comply with the U.S. Public Accounting Oversight Board’s (PCAOB) audits for 3 years in a row. And the measure would also require public companies to disclose whether it is controlled by a foreign government.

There has been bipartisan backing for this bill. The bill has been sponsored by Republican Senator John Kennedy and Democratic Senator Chris Van Hollen. It passed the Senate in May unanimously. And if it passes the House, it would be sent to the White House for President Trump to veto or sign into law.

The government in China has made it illegal for Chinese to submit to scrunity from overseas regulators, making things even more complicated for those companies. To get around the Chinese government’s refusal to comply with the PCAOB, these companies will likely be able to work with a U.S. based accounting firm.

This could directly impact companies like Nio along with others like Alibaba, Xpeng, Li Auto, JD.com, Pinduoduo, China Telecom, and China Mobile. However, the actual implementation of these measures would likely depend on the stance of incoming Treasury secretary Janet Yellen and President-elect Joe Biden.

This is not the first time that Chinese companies took a dip. Several months ago, there was a major selloff due to news about regulation.

Negative Trigger: Additional Shares Issued 

About three months ago, Nio had announced it sold 88.5 million ADRs at $17 each in order to raise about $1.5 billion. The company said it was planning to use the proceeds rom this offering to increase the share capital of the company’s ownership in Nio China and to repurchase interests held by certain minority shareholders of Nio China. Plus it would be used for R&D in autonomous driving technologies.  It is believed that those shares could be sold on the market after 90 days. 

Negative Trigger: Ripple Effect From Kandi Fraud Allegations

Another reason why the stock price of Nio might have fallen is due to a ripple effect from a detailed report published by Hindenburg Research on Monday against another Chinese automotive company called Kandi. That report is titled: “Kandi: How This China-Based NASDAQ-Listed Company Used Fake Sales, EV Hype to Nab $160 Million From U.S. Investors.” Since this report was published, the stock price of Kandi fell over 30%.

Positive Triggers:

There were a few positive news stories about Nio that could push the stock up throughout this month.

Monthly Delivery Record Broken

Nio had announced it broke a new monthly record for deliveries of its EVs in November. The company said that it delivered 5,291 vehicles in November — which is up from 5,055 vehicles in October and over double what it sold last year in the same month.

These deliveries included 1,387 ES8 SUVs (6-seat and 7-seat), 2,386 ES6 SUVs (5-seat), and 1,518 EC6 mid-size crossover SUVs (5-seat). For the year-over-year, deliveries have increased over 109%.

Upgrade By Goldman Sachs

Goldman Sachs analyst Fei Fang had upgraded Nio from Sell to Neutral. And Fang also increased the price target from $7.70 to $59. 

Fang acknowledged that the benefits to Nio were underestimated such as powertrain breakthroughs and the battery-as-a-service program. Plus there are regulatory incentives that have helped drive electric vehicle market demand. Fang is expecting an increase in electric vehicle penetration to go from 5% this year to 20% in 2025.

Deal Signed With Mobileye

It was announced that Nio electric vehicles will be used on trials on Tel Aviv routes following a delay in the arrival of Volkswagen minivans. Israel-based autonomous car technology developer Mobileye signed a strategic cooperation agreement with Nio where dozens of Nio vehicles will be imported to Israel for the development and trials of a fleet of robotaxis, according to Globes.

The stock price of Nio is up 1,189.78% for the year-to-date as it went from $3.72 on January 2 to $47.98 as of today.

Disclosure: I have a small Nio position in my stock portfolio