NIO Stock Falls. It’s the Latest EV Maker to Offer Convertible Bonds.

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Chinese electric-vehicle maker

NIO

(ticker: NIO) said it was offering $1 billion of convertible bonds, joining other EV companies

Nikola

(NKLA) and

Fisker

(FSR) in raising funds in this manner.

Convertible bonds can be turned into shares in the company, potentially diluting existing holders of the stock but allowing the company to borrow money and lower interest rates than with standard corporate bonds.

American depositary receipts of

NIO

(ticker: NIO) traded down 4.3% in premarket trading Tuesday. The U.S.-listed shares have gained more than 5% this year but are still almost 50% lower than they were 12 months ago. NIO has racked up losses this year in a crowded market for luxury electric vehicles. 

“The company plans to use a portion of the net proceeds from the Notes Offering to repurchase a portion of the existing debt securities, and the remainder mainly to further strengthen its balance sheet position as well as for general corporate purposes,” the company said in a statement.

Write to Brian Swint at brian.swint@barrons.com