NIO ($NIO) Investor Settlement
NIO and the other defendants agreed to settle claims that investors were misled about the company’s planned Shanghai manufacturing facility and the impact of declining electric-vehicle subsidies on its business.
Outline:
NIO completed its U.S. IPO in September 2018 while planning to develop its own manufacturing facility in Shanghai. Investors allege that construction never began and that important conditions affecting the project were not disclosed. NIO later abandoned the facility and reported a sharp decline in vehicle deliveries as anticipated subsidy reductions affected demand. The parties have now agreed to settle the securities lawsuit.
Timeline:
September 11, 2018: NIO stated in its IPO registration documents that it was developing its own manufacturing facility in Shanghai.
September 12, 2018: NIO completed its U.S. IPO, with its ADSs trading on the New York Stock Exchange under the ticker NIO.
November 11, 2018: NIO told investors that expected reductions in Chinese electric-vehicle subsidies would not significantly affect its business.
March 5, 2019: NIO announced that it would abandon plans for its Shanghai manufacturing facility and continue relying on JAC Auto to manufacture its vehicles.
March 5, 2019: NIO reported that vehicle deliveries had fallen from more than 3,000 in December 2018 to 1,805 in January 2019 and 811 in February 2019.
March 7, 2019: NIO ADSs closed at $7.09 after falling more than 30% following the disclosures.
March 12, 2019: Investors filed a securities class action against NIO and its executives.
Background:
NIO designs and sells electric vehicles but relied on JAC Auto to manufacture its cars. During its September 2018 IPO, NIO told investors that it was developing its own manufacturing facility in Shanghai and expected it to be ready by the end of 2020.
Investors allege that those statements were misleading because construction of the Shanghai facility never began. The lawsuit also claims NIO failed to disclose that development of the facility depended on having sufficient cash and meeting vehicle-sales expectations.
NIO also told investors that expected reductions in Chinese electric-vehicle subsidies would not significantly affect its business. However, on March 5, 2019, the company reported a sharp decline in vehicle deliveries and said the slowdown was primarily caused by expectations of lower subsidies.
That same day, NIO announced that it would abandon plans to build its own Shanghai manufacturing facility and continue relying on JAC Auto. Following the disclosures, NIO ADSs fell more than 30% over two trading days.
Investors allege that NIO’s earlier statements artificially inflated the value of its ADSs and caused losses when the alleged truth became public. The parties have now agreed to settle the securities litigation, although the provided documents do not state the settlement amount or terms.
What Can Investors Expect Now?
NIO and the other defendants agreed to settle claims that investors were misled about the company’s planned Shanghai manufacturing facility and the impact of declining electric-vehicle subsidies on its business.
If you were damaged due to this situation, you can file for a payout and get your share of the settlement. You can check if you are eligible and other details in the FAQ section.