The shares of NIO Inc. were hit hard by a short sales report on Wednesday, alleging exaggerated financial results, although the China-based electric vehicle maker said the report has no merit and contains “numerous errors.”
it fell 6.8% in pre-market trading, putting it on track for a third straight loss. It had already fallen 7.1% in the last two days.
Grizzly Research, which has called for NIO shares to fall, said it believes sales to Wuhan Weineng Battery Asset Co., which Grizzly says was formed by NIO and a consortium of investors in late 2020, have helped to NIO to inflate revenue by about 10%. and net profits at 95%.
“He [Grizzly Research] The report has no merit and contains numerous errors, unsupported speculation and misleading conclusions and interpretations about company-related information, “NIO said in a statement.” The company’s board of directors, including the committee of audit, is reviewing the allegations and considering the appropriate course of action to protect the interests of all shareholders. “
NIO said in its most recent annual report that Wuhan Weineng’s “subsidiary” is a “subsidiary” of the company. As part of NIO’s “Battery as a Service” (BaaS) offering, which allows customers to purchase an EV and subscribe to use the battery separately, the company sells a battery to Wuhan Weineng and the customer can subscribe with Wuhan Weineng to use it. of the battery.
“Today, we reveal what we consider to be a bold NIO scheme listed on the NYSE,” Grizzly Research said. “[N]IO is likely to use an unconsolidated related party to exaggerate revenue and profitability. “
Grizzly said he believed that the fact that Weineng had 40,053 batteries as inventory in September 2021, after revealing that it only had 19,000 battery subscriptions, suggests that NIO “flooded” Weineng with additional batteries to increase revenue.
“Instead of recognizing revenue over the life of the subscription (~ 7 years), Weineng allows NIO to recognize revenue from batteries that sell immediately,” Grizzly said.
NIO said in its response that it emphasizes its “continued and unwavering commitment” to maintaining high standards of corporate governance and internal control, as well as “transparent and timely” disclosures.
NIO said it will make additional disclosures, “in due course,” and in accordance with the rules and regulations of the U.S. Stock and Securities and Exchange Commission (NYSE).
Shares of NIO have fallen 29.4% so far as of Tuesday, while the stock traded iShares China Large-Cap FXI,
decreased by 6.7% and the S&P 500 SPX index,
has fallen by 19.8%.