By
Svetlana Soroka
April 18th, 2024
Tencent revealed that it increased its stake in NIO. Now, Tencent owns 15.1% of the company’s Class A ordinary shares. NIO has been on a capital raising spree this year to shore up its balance sheet and meet its ongoing cash requirements.
NIO Inc (NYSE: NIO) shareholder Tencent Holdings Ltd. (NASDAQ: TCEHY) decided to widen its share in the electric-car startup. NIO is also seen as a direct competitor of Tesla Inc. (NASDAQ: TSLA) in the world’s biggest car market. NIO shares first skyrocketed but then calmed down a bit. A regulatory filing by Tencent revealed that this Chinese multinational conglomerate took 1.68 million American depositary receipts (ADRs) this month, boosting its NIO stock share to 15.1%.
In desperate need of cash, NIO has been dealing with the efforts to raise on capital in order to improve its balance sheet and meet always growing operational necessities.
That also involves the issuing of 72 million American depositary shares this month and an investment deal the company made with the city of Hefei earlier this year.
NIO Shares Rose after Decision from Tencent
Shares of Chinese automobile manufacturer NIO that is specialized in designing and developing electric autonomous vehicles rose by 1.23% to $7.43 on the New York stock market. That represented a 15-month high of $7.90 intraday. NIO shares are extended off a 5.75 buy point, meaning shares are not in buy range, according to MarketSmith chart analysis. However, at the time of writing NIO stock is nearly 1% down, at $7.33.
The relative strength line for NIO stock has dashed to its highest level in more than a year.
Let’s also say that NIO’s shares have risen more than 80% in 2020, on growing investor interest in China’s electric-vehicle market and following a huge investment from economic-development authorities in Anhui province, China’s industrial hub, in April.
As the dramatic year-to-date runs, most Wall Street experts are warning auto investors to be highly cautious, especially when it’s about to hold ratings and price targets that might hint consensual thinking that a retracing might be possible. Still, Goldman Sachs analyst Fei Fang, earlier this month raised his rating on NIO to buy, from neutral, with a price target of $6.40.
Last year, NIO almost came to collapse amid widespread vehicle recalls over battery risks and falling sales.
Tencent Backed by Local Players/Investors
Tencent (TCEHY) stock rose 3.22% to $64.12, just beyond buy range from a flat-base $58.76 entry.
It should be mentioned that Tencent has for years fascinated traders especially when it comes to its hugely popular online gaming business, payments system and WeChat social networking platform.
After local players helped boost revenue during China’s COVID-19 lockdowns earlier in the year, Tencent’s main role in the lives of hundreds of millions of Chinese people added a splash of optimism that the company can keep up growing.
Regulatory interference from Beijing still stands as the main risk, with the government aggravating investigation over the country’s user-generated online content that’s obviously hard to watch.
Meanwhile, China today stated it halted some operations on 10 of the country’s most popular live-streaming apps, including services backed by Tencent.
Tencent stock analysts boosted their average 12-month price target by 13% over the last six weeks. Chinese investors are also fans, holding a record amount of the company’s shares through exchange links with Hong Kong.
Tencent was also one of the earliest NIO backers and previously held a 13.4% stake. The company now wants to become a leader in artificial intelligence, cloud computing and connected devices, including, already mentioned, self-driving vehicles.
Tesla (TSLA)stock fell 1.23% to $1,007, extended from an 869.92 buy point. The RS line for Tesla stock is at a record high.