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This week in EVs: Nio’s big deal

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Investing.com — Here is your weekly Pro Recap of the past week’s biggest headlines in the electric vehicle space: Nio raises $2.2B; Mullen’s third reverse split; and tearing it up with tariffs.

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Nio’s big deal

China’s Nio Inc. (NYSE:) announced Monday that the electric vehicle maker has signed an investment deal with Abu Dhabi-based CYVN Holdings worth $2.2 billion.

This latest deal, which is set to be finalized next week, raises CYVN’s ownership stake in NIO to 20.1%, making CYNV Nio’s largest individual shareholder. However, despite this ownership increase, the founder and CEO, William Li, will maintain the highest voting authority due to his ownership of Class ‘C’ ordinary shares.

Once the deal is closed, CYNV will be entitled to nominate two directors to the Company’s board, so long as it continues to beneficially own no less than 15% of the Company’s outstanding share capital.

Analysts at Deutsche Bank highlighted the deal in a recent note, saying the investment “eliminates the near-term overhang around capital runway “.

Nio was previously projected to burn between 11 and 15 billion RMB in 2024, placing the company in a net debt situation or perilously close to it. However, with this recent deal in place, NIO is expected to secure financial stability until 2025.

Shares of NIO ended the week up 0.94% after reaching a weekly high of $8.87/sh on Tuesday.

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Mullen reverse splits… again

Michigan-based Mullen Automotive Inc (NASDAQ:) executed a 1-for-100 reverse stock split this week after shareholders voted to approve the proposal at a special meeting held December 18th.

The Reverse Stock Split is primarily aimed at ensuring the Company’s compliance with Nasdaq’s minimum bid price requirement of $1.00 per share for maintaining its listing on the exchange.

To regain compliance with Nasdaq’s listing requirements, MULN is required to sustain a closing stock price at or above $1 for 20 consecutive business days by January 22, 2024. Failure to meet this criterion could result in the delisting of MULN stock from the Nasdaq exchange.

There is no guarantee that the split will keep shares above the threshold for compliance. The company enacted two reverse splits earlier this year in an attempt to maintain compliance. A 1-for-25 and 1-for-9 reverse split were each executed earlier in 2023, bringing Mullen’s cumulative reverse split ratio for the year to 1-for-22,500.

If the company fails to meet the minimum criteria, and is forced to move over to the over-the-counter (OTC) market, there would be several consequences for MULN. Firstly, OTC markets have less liquidity and obtaining funding is harder. Stocks in OTC are generally viewed negatively as many end up there due to issues with major exchanges. Also, Shareholders are worried about Mullen’s plans to raise capital next year, as past capital raises involved diluting shareholders. News of the planned fundraiser caused MULN to hit a new low of 8.33 cents on Wednesday.

Shares of MULN ended the week down 29.46% to $9.84/sh.

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U.S. considers raising tariffs

Reports surfaced this week claiming the U.S. government is discussing the possibility of increasing tariffs on some Chinese goods, including electric vehicles.

Chinese vehicles entering the United States currently face a 25% tariff implemented by former President Donald Trump.

Reports suggest the U.S. government is currently debating the Trump-era tariffs imposed on around $300 billion worth of Chinese goods, with plans to finalize a thorough review of these tariffs in early 2024.

The Biden administration is considering a reduction of tariffs on specific Chinese consumer goods that officials don’t consider strategically crucial. Simultaneously, they are evaluating the option of increasing tariffs on clean-energy products.

Global automakers, such as Tesla Inc (NASDAQ:), notably depend on China as a significant hub for exporting their vehicles.

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