Read The Full Article On: Marketwatch
Two of the most popular stocks on the planet right now are electric vehicle manufacturers Nio and Tesla. Together, they trade about 200 million share daily, thanks in large part to young individual investors hungry for a piece of the action.
But these stocks are decidedly not the same. Tesla TSLA, -1.65%, which went public at a mere $17 a share more than 10 years ago, has been through the Wall Street wringer, while Nio NIO, +2.69%made its debut in U.S. markets a little more than two years ago. Tesla is U.S.-based, with a cult-like following in American car culture and a quirky CEO, while Nio is a Shanghai-based EV company that doesn’t have the same amount of fireworks around its brand.
Both picks have a lot of long-term potential as they are core players in the long-term growth of the electric vehicle market. But if I had to pick just one to purchase at this price and hold for all of 2021, my money is on Nio over Tesla.
Nio’s secondary offering was well-timed and appropriate: Some investors panned Nio’s recent secondary offering in December as a blatant money grab to capitalize on its skyrocketing share price.
Public markets fundamentally exist so companies can raise capital to keep growing, and the $2.6 billion windfall for Nio was the right move at the right time. Nobody held a gun to anyone’s head and demanded they pay $39 a share. That was a fair price — and in truth, more than 7% below market rate at the time.
If you hate secondary offerings, you hate Tesla too: While we are on the topic, does nobody remember a similar move from Tesla less than a year ago, where the firm raised $2 billion on shares priced at $767 (pre split)? Or a $2.7 billion secondary offering and bond issuance in 2019? Or how about a September SEC filing that said Tesla will sell even more shares “from time to time” and “at-the-market” prices to keep raising cash? Followed by that $5 billion it raised this month?
If you think Nio’s supposed share dilution is a death knell, it’s time to review the headlines from Tesla.