(Bloomberg) -- Guangzhou Automobile Group Co. confirmed it is in talks with NIO Inc. about an investment in the cash-strapped Chinese electric-vehicle maker.
GAC, its units and external parties could invest as much as $150 million in NIO, the automaker said in a statement to the Shanghai stock exchange Thursday. Plans are preliminary and no agreement has been reached, it said, echoing a NIO statement that said the two have explored financial and strategic opportunities.
NIO's shares surged as much as 19% Wednesday following a Sina Finance report that said GAC was preparing to invest up to $1 billion in the maker of ES6 and ES8 plug-in sport utility vehicles. GAC denied the report, saying there was “great uncertainty on whether any agreement will be reached.”
NIO has been hit by weakness in China's overall auto market, cost overruns and recalls. The Shanghai-based company said late last year it was making significant progress toward raising more funds, but it also warned it didn't have enough money to carry on operating for another 12 months.
The automaker's Chief Financial Officer Feng Wei said on Dec. 30 that a $200 million convertible-bond sale NIO announced in September was almost complete. It received $100 million from backer Tencent Holdings Ltd. and was processing a purchase by Chief Executive Officer William Li.
GAC and NIO have an EV joint venture that was established in 2018.
NIO's shares pared their gain to 14% at the close in New York. GAC's Hong Kong-listed shares fell 3.6% Thursday morning, while its Shanghai-listed stock slipped 1.1%.
--With assistance from Esha Dey, Molly Schuetz and Kevin Miller.
To contact Bloomberg News staff for this story: Craig Trudell in New York at ctrudell1@bloomberg.net;Chunying Zhang in Shanghai at czhang714@bloomberg.net
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, ;Young-Sam Cho at ycho2@bloomberg.net, Will Davies, Ville Heiskanen
©2020 Bloomberg L.P.
With assistance from Bloomberg
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