Nio Inc. is an electric-car company that’s been called the Tesla of China.
But things are not that simple.
Let’s explore the strange case of Nio’s NIO stock-price movements on the New York Stock Exchange and why it shows that risk in the U.S. equity market is underappreciated. The Shanghai-based company debuted Wednesday with American depositary receipts.
Please click here for an annotated chart of Nio’s stock. Please note the following from the chart:
• The indicated price range of the U.S. initial public offering (IPO) was $6.25 to $8.25, as shown on the chart.
• Before an IPO, it is common for companies to conduct a roadshow arranged by their bankers on Wall Street. The company and its bankers travel around and give presentations to potential investors and analysts. The purpose of the roadshow is to generate buying interest and excitement among potential investors so that the company can sell its stock at a high price.
• These days, the indicated price range is often raised due to heavy demand. In this case, the price range was not raised, showing that demand was not there.
• Nio’s IPO was priced at $6.26, a penny off the low point of the range. This indicates that Nio was not successful at persuading investors to pay a higher price.
• There is often a bid by the syndicate right below the IPO price. The purpose of the bid is to not allow the stock price to fall below the IPO price.
• As the chart shows, the stock fell below the IPO price. This did not bode well.
• An analyst put a $4.50 target on the stock.
• As the chart shows, the stock did not move extraordinarily on the first day of trading (Wednesday)….Read more at MarketWatch.
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