NIO Stock Resumes Downtrend: Funding for New Factory Called Off

NIO stock

Chinese electric vehicle maker NIO Inc (NYSE:NIO) has been in the middle of immense trouble for much of the year, and it is no surprise that NIO stock has suffered considerably throughout 2019.

Another Setback

The company has had a string of setbacks over recent months, and this morning it made a fresh report that resulted in another plunge for the stock. It has been revealed that NIO has called off its plans to make a substantial investment in a manufacturing plant in China.

As soon as the news broke, the stock started sliding, and at one point, it dropped by as much as 6% to $1.46 this morning.

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Last week, NIO stock gained after it emerged that the company was engaged in discussions with Wuxing District in Huzhou City over a $704 million investment in its plant in the district. The plant was supposed to churn out 200,000 electric vehicles a year.

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However, the prevailing condition in the market eventually resulted in a breakdown in these talks. No agreement took place, and, naturally, NIO stock started its current downward descent.

NIO stock has declined by as much as 55% over the past three months, and recently, analysts raised questions about its ability to stay afloat.

In its third-quarter report, the company reported a 35% sequential rise in the number of deliveries. While that figure is no doubt impressive, it is important to point out that the company’s cash position is in a precarious state, and analysts believe that it would be difficult for NIO to stay afloat for long. After it had its IPO last year, NIO managed to raise $1 billion, but now it only has $503 million in cash and cash equivalents at its disposal.

Analysts believe that the company either needs a bailout of some nature or a major rebound in the Chinese economy if it is to engineer a comeback. Most experts believe that the better show in the third quarter is no reason to celebrate NIO stock.

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Featured image: DepositPhotos © tomwang

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