NIO has agreed to redeem 8.6% equity interests in NIO (Anhui) Holding Co., Ltd., the legal entity of NIO China, triggering speculation that Nio China may soon go public in China.
The speculation accured because after the buyback, NIO will hold a controlling stake of 84.5% in NIO China. According to the previous agreement, NIO has the right to buy back the 50 percent stake held by Jianheng New Energy Fund before Nio China goes public.
However, NIO told the Beijing News that the establishment of NIO China is to open the channel for NIO's RMB financing, "The listing is a kind of RMB financing, and there is no such plan in the near future.”
NIO has no repurchase rights to strategic investors other than Jianheng New Energy Fund, but the agreement states that the strategic investors have the right to request NIO to make a buyback, provided that:
1. NIO China fails to complete its IPO within 60 months of receiving the full Phase 1 investment from the strategic investor (the listing venue must be approved by all shareholders).
2. NIO China did not file an IPO application within 48 months of receiving the full Phase 1 investment from the strategic investor.
3. the shareholders of the Company requesting NIO or Li Bin to redeem the shares of the Company, resulting in a change in the control of NIO or NIO China.
4. NIO's failure to inject assets into NIO China within one year of the full injection of the Phase 1 investment, or NIO's failure to inject funds into NIO China by 31 March 2021.
5. NIO China shall deliver less than 20,000 vehicles for two consecutive years after receiving full investment from the strategic investor for Phase 1.
In addition, prior to the listing of NIO China, NIO shall not directly or indirectly transfer, pledge or otherwise dispose of the shares of NIO China to a third party without the prior consent of strategic investors in a manner that would result in the company's shareholding in NIO China falling below 60%.
However, NIO has the right to transfer, pledge or otherwise dispose of up to 15% of the shares of NIO China, either directly or indirectly, without the prior consent of the strategic investor.
In April 2020, NIO entered into definitive agreements with a group of investors in Hefei in connection with the strategic investments into NIO China.
Under these definitive agreements, before NIO Anhui is converted into a company limited by shares for the purpose of its qualified IPO, NIO and its designated parties have the right to redeem 50% of the equity interests in NIO Anhui held by the Jianheng New Energy Fund, one of the Hefei Strategic Investors.
On September 16, 2020, NIO Nextev Limited, on behalf of NIO, entered into a share transfer agreement with Jianheng New Energy Fund, pursuant to which NIO Nextev will redeem from Jianheng New Energy Fund 50% of the equity interests in NIO Anhui currently held by the Jianheng New Energy Fund, which accounts for 8.6% equity interests in NIO Anhui, NIO said in the filing.
The total consideration of the redemption will be RMB511.5 million, consisting of the actual capital increase payment Jianheng New Energy Fund has made plus prorated interest accrued at an interest rate of 10 percent per annum, the document showed.