Nio Stock: CRASH EXPLAINED | BIG MISTAKE TO AVOID - YouTube

we are doing an analysis of what caused that nio  crash on the 15th of january what really happened  

there what's really the underlying cause that  lots of questions about a lot of comments which  

i always appreciate guys and we are going to look  at what actually happened at least what is a very  

very substantial factor for it and how that can  make us smarter new investors and any kind of  

investor in the future as always guys there's not  financial advice just the rumblings of a mad man  

here in hong kong and his cats so guys let's get  straight to it nio as you know issued some bonds  

and they were going to raise 1.3 billion us  dollars in bonds in fact they raised 1.5 billion  

us dollars why is that well the offering was over  subscribed seven times so a very positive strong  

demand there for nios bonds and a it means that  the market and the institutional investors and  

their clients have strong appetite for nio's bonds  and therefore think that they are worth holding so  

let's have a quick look at some of the actual  documents because i think it's an interesting  

example for nio but also for all other offerings  and we are seeing a lot of offerings we are seeing  

the whole ev sector taking advantage of this very  positive momentum for the uv world to raise more  

capital cheaply so we see here this announcement  from nio that basically they raised 750 million  

for the senior 2026 notes and then another 750  million for the con vertical senior notes 20  

27 the 2027 notes and that was 200 million  more than they thought now we're going to  

get to how they were priced and what they pay  and i think that might surprise you what they  

are paying for that interesting here is that and  we were we were told that would probably happen  

that they converted the outstanding 4.5 percent  convertible senior notes which were due in 2024  

uh about 581 million us dollars worth of them into  american depository shares so they issued shares  

to these holders in exchange for taking back the  2024 notes what's the advantage of the company  

well what's four and a half times four what is uh  four and a half percent of 581 i think it's about  

26 million us dollars in interest a year nio is  saving by that little stroke of the pen there  

and i imagine the ads holders are happy and  they got a little bit more for their money  

there in terms of shares but it doesn't really  cost the company anything to create shares right  

it does cost shareholders though so bear  that figure in mind 581 million there  

and if you add that on top of the 1.5 billion that  they have issued in shares which are convertible  

into adss or adrs depending on what you want to  call them but basically new york listed shares  

and i put speech marks around that because  they're not really shares as we all know  

those can be converted also uh when can they be  converted well in uh they should be converted  

in 2026 and 2027 before that they can really  only be exchanged for cash there are certain  

times where that can be done and at what rate  are they going to be converted at well that's  

interesting so in 2026 they are going to get  basically 93.06 cents for the ads's that's  

essentially what they're paying for uh which  is 50 above where it was on the 12th of january  

and the same is the case for the 2027 notes there  will also be exchange at 93.06 us dollars per adr  

now why would somebody wait a year and get  the same value of uh adrs there well because  

uh the that's interesting that the 2026 notes pay  zero interest no interest whatsoever so nio here  

getting 750 million us dollars for zero interest  absolutely free for the 2027 notes they're paying  

how much 0.5 per year which i mean is still  very near to free money all they have to do is  

they have to issue new shares in 2026 and 2027  for this that's the appeal of convertible debt  

to companies no interest and no repayment you just  issue shares the only people who lose slightly  

are the equity shareholders who get diluted and i  think that's really the point i want to get to um  

and i just want to show you guys here if you look  on any of the sort of bond websites you can see  

uh you know the amount here and the actual bond  this bond is an over-the-counter bond i'll try to  

look on my brokerage accounts i can't actually  get a price for it because you would expect  

that price it was priced at 100 it might actually  go up over time as people think that 93 us dollars  

per nio share is a very appealing offering so if  the nio share price exceeds 93 dollars and six  

cents before 2026 you would certainly imagine  that these bond values would go up substantially  

alongside that otherwise you could buy the  bonds and you get a much cheaper way into nio  

so it's like a like a very long kind of uh  contract basically you get your hands on the share  

uh book runners for credit suisse goldman sachs [  __ ] stanley and the china international capital  

corporation uh pretty good line up there who  obviously did a good job they got it seven times  

over subscribed and then the 2027 bond here at 0.5  percent maturing in 2026 uh both fully subscribed  

uber subscribed uh both um used the option so  what does this mean well at together i'm using  

my clever calculator here 1.5 billion plus 0.581  billion which is uh the figure that they converted  

here 581.7 billion that together is 2.081 billion  u.s dollars now what is the market cap today  

88 billion so this over 88 billion that is  if you can see that guys that is 2.3 percent  

dilution so it does mean that they have  essentially issued 2.3 percent additional shares  

without giving us any which isn't very nice but it  is it is of course what growth companies do people  

keep issuing shares and now let's have a look at  the chart because they did that on was the 15th of  

january and what happened on the 15th of january  uh well this happened here we went from 60 uh  

to from being very happy near shareholders to  being slightly less happy new shareholders at 57  

which is uh you know three over 60. it's a drop  of five percent so the market uh dropped a little  

bit more there on some other news as well it  covered all sorts of things happening on that  

friday but you can see here that that two percent  or so is a factor and it's an important factor  

and i think it's important to understand when  you see companies announcing convertible debts  

being issued in the future you just know well  that's going to be dilutive and you can calculate  

yourself basically how much that will dilute your  shares and how much you would expect them to go  

down by and that's just that's just life life as  a shareholder of a company that issues convertible  

debt um it is it is it is it is simply what it is  but i think that is is an interesting factor here  

in that very sharp sell-off that we have there  on the early morning of the 15th of january  

uh simply more shares in circulation or promised  to be in circulation uh because you know they're  

coming in 2026 2027 uh three quarters of that so  i think that's an interesting uh take i thought  

i'd wanted to just run through that as a sort of a  little bit of an edutainment if you will as always  

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