Why NIO Popped Upon Second Offering

,   You may think that companies only make a public offering of shares one time, as in the initial public offering (IPO).   But actually, there's such a thing as a secondary offering… and oftentimes it has a big impact on the stock price.   That's what just happened with red hot NIO, the Chinese electric vehicle manufacturer that has been on a 360% year-to-date tear.   Trading volume spiked to 8.4 million shares, as NIO became the most actively traded stock prior to Monday's open.   Despite sinking in the pre-market, the stock rallied and closed strong after it's secondary offering yesterday.         NIO sold 88.5 million American depositary shares, 20% more than the 75 million it announced it would offer on Friday.   There's more to the story than meets the eye.   It has to do with how NIO plans to use the money.   Here's the scoop...   There are a variety of reasons why a company might plan to conduct a second offering.   The extra money the company brings in may be helpful in allowing it to pursue longer term goals, such as research and development or expansion.   It could also be used to pay off debt.   Which was exactly the case with NIO.   At the start of 2020, NIO was extremely low on cash as a result of the coronavirus impact.   To stay afloat, NIO made a deal with economic development authorities in China and received a $1 billion infusion.   What's the catch?   All the assets had to go into a Chinese subsidiary called "NIO China."   But apparently investors were pleased because NIO proceeded on its huge 360% price surge.   Fast forward to last Friday, NIO's CEO William Bin Li decided to bail out some of the "NIO China" debt.   This turned out to be very bullish for the NIO stock.   Both short term and long term, less assets bound up in "NIO China" looks to favor American investors.   The takeaway?   As traders, we have to be aware of the reasons why a company pursues a follow-up offering.   Oftentimes, second offerings can cause a stock to drop.   If the company uses the second offering to pay off debt in a way that doesn't benefit investors, we have to be mindful of how we position ourselves.   But there are plenty of examples of stocks just like NIO that jumped the day of their second offering.   Like the CRISPR Therapeutics stock, which increased as much as 17%.   Any news event that generates high volatility tends to cause overreactions to either side.   Therefore, plan for the best… but also keep your risk in check and approach everything with an open mind.   P.S. There's another stock that popped after a noteworthy event yesterday, and that's AAPL. Following AAPL's stock split, the stock price shot upward. AAPL was an example yesterday of more shares being created and the price increasing after the event.   Kyle Dennis is playing the up and down movement of AAPL once everyday at 3.30 PM ET in his brand new Mobile Closer service, and yesterday he crushed his move on the stock following the split. 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