EV of the Week: Nio’s Big Deal

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Investing.com — Here’s our weekly pro recap of the biggest electric vehicle industry headlines of the past week: Nio raises $2.2 billion; Mullen’s third reverse split; Rip them off with tariffs.

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It’s a big deal for Nio

China’s Nio Inc. (NYSE:) announced on Monday that the electric vehicle maker has signed a $2.2 billion investment deal with Abu Dhabi-based CYVN Holdings.

The transaction, which is expected to close next week, increases CYVN’s stake in NIO to 20.1%, making it CYNV Nio’s largest individual shareholder. However, despite this increase in ownership, founder and CEO William Li will retain the highest voting power due to his ownership of Class ‘C’ common stock.

Upon completion of the transaction, CYNV will be entitled to nominate two directors to the Company’s Board of Directors as long as they continue to beneficially own more than 15% of the Company’s issued share capital.

Analysts at Deutsche Bank highlighted the deal in a recent note, saying the investment “removes a near-term bump around the capital runway.”

Previously, Nio was expected to burn between 11 billion and 15 billion yuan in 2024, putting the company at or near net debt. However, with this transaction concluded, NIO is expected to secure financial stability by 2025.

NIO’s stock closed the week up 0.94% after reaching a weekly high of $8.87/sh on Tuesday.

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Mullen reverse split…again.

Michigan-based Mullen Automotive Inc (NASDAQ:) implemented a 100-for-1 stock split this week after shareholders voted to approve the proposal at a special meeting held on December 18.^Day.

The primary goal of a reverse stock split is to ensure that the company complies with Nasdaq’s minimum bid price requirement of $1.00 per share to remain listed on the exchange.

To regain compliance with Nasdaq’s listing requirements, MULN must maintain a closing stock price above $1 for 20 business days until January 22, 2024. Failure to meet these criteria may result in MULN stock being delisted from the Nasdaq exchange.

There is no guarantee that the spin-off will keep the shares above the compliance threshold. The company enacted two reverse splits earlier this year to maintain compliance. The 25-to-1 and 9-to-1 reverse splits, respectively, will be implemented in early 2023, bringing Mullen’s cumulative reverse split ratio for the year to 22,500-to-1.

If a company fails to meet the minimum standards and is required to move to the over-the-counter (OTC) market, there may be several consequences for the MULN. First, OTC markets are less liquid and more difficult to raise funds. Stocks on OTC are generally viewed negatively because many of them are listed on OTC due to major exchange issues. Shareholders are also concerned about Mullen’s plans to raise capital next year, as past capital raisings have entailed shareholder dilution. News of the planned fundraiser pushed MULN to a new low of 8.33 cents on Wednesday.

MULN’s stock price closed the week down 29.46% at $9.84/sh.

US considers tariff hike

Reports emerged this week that the U.S. government is discussing the possibility of raising tariffs on some Chinese products, including electric vehicles.

Currently, Chinese vehicles imported into the United States are subject to a 25% tariff imposed by former President Donald Trump.

The U.S. government is currently discussing Trump-era tariffs on about $300 billion worth of Chinese goods and plans to finalize a thorough review of those tariffs in early 2024, according to reports.

The Biden administration is considering lowering tariffs on certain Chinese consumer goods that officials do not consider strategically important. At the same time, we are evaluating options for increasing tariffs on clean energy products.

Global automakers such as Tesla Inc (NASDAQ:) particularly rely on China as an important hub for vehicle exports.