Why Did NIO Drop? - Should You Buy $42? - MASSIVE News- NIO Stock Update & Price Prediction Upgrade
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Is NIO still a buy? Why is NIO going down right now, how does the new share offering affect us as NIO investors and how will it affect NIO as a company? So there are soo many things happening for NIO right now. At the time of this video they are down about 8% and there is just a lot of panic going on in general. So let’s go through why NIO is down right now and whether I believe the stock is still worth buying? Let’s also go through some recent news that might help NIO in the delisting case.
Firstly looking at the weekly stock chart we are down again from open on Monday so it is looking like we are about to see another harsh week for us NIO investors. Although this only applies if you are looking to get into this company as a short term play to make a quick buck, which I don’t agree with by the way! I always try to discourage people from buying short term call or put options. It is incredibly risky and unless you are some kind of oracle you are almost gambling your money.
If you are rather investing in NIO because you believe in their ability to dominate the electric vehicle market many years in the future I think these current levels should not bother you TOO MUCH. We haven’t seen prices this low in more than a month so as long as you don’t think the fundamentals of NIO have changed these past weeks there is absolutely no reason to panic.
Although I do feel sorry for all those people who bought at the 50 dollar range and now are doubting themselves as we have gone down to almost 40 dollars. I think this really tests your strength as an investor and no matter how much you researched into a company and no matter how CONVINCED YOU ARE THAT THEY WILL DO WELL IN THE FUTURE it still hurts alot to see the stock going down.
That is also why I always talk about making sure to stay diversified and own a lot of different stocks so you spread your risk and avoid getting too EMOTIONALLY invested into one single company. For example, if you, like me, believe in the electric vehicle sector as a whole, why not own a couple shares in Tesla or Xpeng as well?
But anyways, that takes us to the REASON WHY NIO is down today, and guys usually there is no TRUE reasons for why a stock is down a particular day. Even when receiving bad news or having subpar reports a stock can still go up that day. BUT THIS TIME there is A VERY CLEAR AND OBVIOUS reason for why NIO is down and I will explain why.
That reason IS NIO OFFERING 60 MILLION EXTRA SHARES TO INVESTORS. By doing this they can raise more than 2.5 BILLION DOLLARS in cash to invest back into their business operations and to get the funding necessary to carry through all the different tech projects they have going on. Now you might be wondering, where is this money coming from and how does it lead to the share price GOING DOWN?
Basically the money is coming from all the people that were already invested in NIO. By selling 60 million extra shares that didn¨t exist before there are now MORE SHARES IN CIRCULATION THAN BEFORE. And since NIO as a company hasn¨t changed in valuation much compared to yesterday we see a situation where there are MORE SHARES without a change in valuation. Thus leading to the already existing shares being worth less. And since there 60 million more shares now that equates to the existing shares losing around 5% in value. And that is why the dip we are seeing today is very much expected. Although this larger dip that goes beyond 5 or 6% is just like always the market being volatile and unsure where to put NIO at this moment in time.,
BUT how this almost 3 billion dollars in cash WILL SPENT BY NIO will be the most important aspect of this whole thing. We already know that they have plenty of cash already to not go bankrupt so I think this is money they will use to scale up their manufacturing further, to develop their new technologies and possibly to help future expansion to the US and Europe.
Despite NIO founder and CEO William Li Bin saying earlier that he will not be issuing more shares anytime soon, I do understand the rationale for changing his mind. Li’s adapting to keep up with all the other Electric Vehicle companies trying to accelerate their scaling process and outgrow each other. By now we have seen Li Auto, XPeng and Even Tesla issue more shares to raise money for their growth. And keep in mind that Tesla IS ALREADY AHEAD OF THE OTHERS scaling wise SO it really seems like the money can be helpful.
If we were seeing only one company do this it would be a fair assumption that they are desperate for money to survive. But if all the major EV companies in the industry are doing it, it is clear that the money is needed for something much different. I think they are doing this to get ahead in the EV race and to scale their operations and expand faster than their competitors. It is a race that is being taken TO THE NEXT LEVEL.