Shares of NIO Explode on Better Than Expected Q3 Results

Shares of Chinese electric car maker Nio Inc. were soaring over 70% on Monday after the company reported better than expected financial results for the third quarter.

For the quarter ended in September, the company reported that deliveries increased 35% sequentially, reaching 4,799.

That helped drive vehicle sales to $242.5 million during the quarter, which was a 22.5% increase from the second quarter and a 21.5% improvement from the prior year’s third quarter. Total revenue gained 25% to $257 million versus the prior year, and beat analysts’ estimates of $234 million.

NIO Inc. surged in U.S. trading after the Chinese electric-car maker paired better-than-expected quarterly results with a warning that it’s still running low on cash.

Ironically the Shanghai-based company doesn’t have enough money to continue operating another 12 months but Chief Financial Officer Feng Wei assured that “significant positive progress” has been made arranging financing by selling equity or debt.

“It’s not as though management definitively addressed the company’s solvency problem,” analyst Alexander Potter at Piper Jaffray Cos. remarked. He has the equivalent of a hold rating on NIO.

He added, “Although NIO made some encouraging comments on today’s call, we still lack conviction in our estimates. In particular, we don’t know how much capital the company will be able to raise — and we don’t know when this cash infusion (if any) will materialize.”

“Significant new financing remains needed if NIO is to remain a going concern,” Robin Zhu, an analyst at Sanford C. Bernstein remarked. Zhu added, “We doubt NIO can put off paying its suppliers indefinitely, and expect significant new financing (and dilution to ADR holders) to be required if NIO is to remain solvent.”

Disclaimer: We have no position in Nio Inc. (NYSE: NIO) and have not been compensated for this article.