Nio (NYSE:NIO) licensed its technology to a unit of Abu Dhabi’s CYVN state investment vehicle.
The deal with CYVN’s Forseven unit comes just months after the Gulf country’s $2.2 billion investment in the Chinese electric vehicle (EV) maker.
Nio said it will get a fixed upfront license fee plus royalties based on future sales of licensed products by Forseven.
The agreement sent Nio up 2.4% in overnight trading. It is expected to open today at $5.53 per share, a market capitalization of almost $12.5 billion.
Selling the China
While the deal gave Nio stock a short-term lift, the longer-term outlook for investors is less rosy.
Shares are down 36% in 2024, and JPMorgan Chase has advised clients to sell. The bank cited low January sales for the downgrade. It also said price cuts by Tesla (NASDAQ:TSLA) and other Chinese rivals are keeping it from being profitable. The new price target is $5/share.
Nio was the first Chinese EV maker to hit the New York stock market, pricing at $6.26 in September 2018. After initial optimism, “smart investors” began bailing on it the next year. Nio needed a bailout from a regional Chinese government to get through the pandemic. It has lately been buying back factories and was recently pushing its battery swap technology in Europe.
Nio’s January deliveries, originally reported as good at 10,055, are now being seen as not good enough.
Forseven is a brand of luxury EVs in England and has a controlling interest in the supercar maker Gordon Murray. It plans to combine Nio’s technology with Murray’s iStream manufacturing process. Murray puts glass composite panels on a steel frame that can scale to any car design.
NIO Stock: What Happens Next?
The deal is unlikely to be a windfall for Nio, which is depending on its Arab investors for its push into Europe. Sales numbers, not licensing revenues, will tell the tale.
As of this writing, Dana Blankenhorn had no positions in stocks mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
