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Investing.com — Here's your weekly professional summary of last week's biggest headlines in the EV space: Nio raises $2.2 billion; Mullen's third reverse split; and destroying it with tariffs.
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Nio's big problem
China's Nio Inc. (NYSE ) announced on Monday that the electric vehicle maker signed an investment agreement with Abu Dhabi-based CYVN Holdings worth $2.2 billion.
This latest deal, which will close next week, brings CYVN's ownership stake in NIO to 20.1%, making CYNV Nio the largest individual shareholder. However, despite this increase in ownership, founder and CEO William Li will retain ultimate voting authority due to his ownership of Class 'C' common stock.
Upon closing of the deal, CYNV will have the right to nominate two directors to the Company's board of directors, provided that it continues to beneficially own not less than 15% of the Company's outstanding capital stock.
Analysts at Deutsche Bank highlighted the deal in a recent note, saying the investment “removes near-term excess around the capital runway.”
Nio was previously projected to burn between RMB 11 and 15 billion in 2024, putting the company at or dangerously close to net debt. However, with this recent agreement in place, NIO is expected to ensure financial stability until 2025.
NIO shares finished the week up 0.94% after hitting a weekly high of $8.87/sh on Tuesday.
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Mullen reverse splits…again
Michigan-based Mullen Automotive Inc (NASDAQ:) executed a 1-percent reverse stock split this week after shareholders voted to approve the proposal at a special meeting on Dec. 18.th.
The reverse stock split is primarily intended to ensure the Company's compliance with Nasdaq's minimum offering price requirement of $1.00 per share to maintain its listing.
To regain compliance with Nasdaq listing requirements, MULN must maintain a closing stock price equal to or greater than $1 for 20 consecutive business days prior to January 22, 2024. Failure to meet this criterion could result in the delisting of MULN shares from the Nasdaq exchange.
There is no guarantee that the division will keep the stock above the compliance threshold. The company enacted two reverse splits earlier this year in an attempt to maintain compliance. A 1-for-25 and 1-for-9 reverse split was executed in early 2023, bringing Mullen's cumulative reverse split ratio for the year to 1 for 22,500.
If the company does not meet the minimum criteria and is forced to move to the over-the-counter (OTC) market, there would be several consequences for MULN. First, OTC markets are less liquid and obtaining financing is more difficult. OTC stocks are generally viewed negatively as many end up there due to issues with major exchanges. Additionally, shareholders are concerned about Mullen's plans to raise capital next year, as previous capital raises involved diluting shareholders. News of the planned fundraising sent MULN to a new low of 8.33 cents on Wednesday.
MULN shares ended the week down 29.46% to $9.84/sh.
The United States considers increasing tariffs
Reports emerged this week claiming that the US government is discussing the possibility of increasing tariffs on some Chinese products, including electric vehicles.
Chinese vehicles entering the United States currently face a 25% tariff implemented by former President Donald Trump.
Reports suggest that the US government is currently debating Trump-era tariffs on around $300 billion worth of Chinese goods, with plans to finalize a comprehensive review of these tariffs by early 2024.
The Biden administration is considering a reduction in tariffs on specific Chinese consumer goods that officials do not consider strategically crucial. At the same time, they are evaluating the option of increasing tariffs on clean energy products.
Global automakers, such as Tesla Inc (NASDAQ:), are heavily reliant on China as a major hub for exporting their vehicles.
