Nio Responds to Short Seller Claims, Shares Drop 10% in Hong Kong

Tesla Inc TSLA, rival Chinese EV maker Nio Inc NIO, refuted bearish short-seller claims on its stock claiming the company would inflate its revenues and profitability.

What happened: On Tuesday, Grizzly Research released a report claiming that Nio is likely using an unconsolidated related party, Wuhan Weineng, to exaggerate its sales and profitability.

Grizzly Research called the report, “We believe NIO is playing Valeant-esque accounting games to drive revenue and increase net income margins to achieve goals.”

See also: Why Alibaba, Nio and Chinese peers are slipping in Hong Kong today

Nio’s response: Denying Grizzly’s claims, Nio said it is “uncredited and contains numerous errors, unsupported speculation and misleading conclusions and interpretations.”

Nio said it will make additional disclosures required by the US and Hong Kong stock exchanges, adding that “the company’s board of directors, including its audit committee, are reviewing the allegations and considering the appropriate course of action to protect the interests of everyone.” shareholders.”

Why it matters: Grizzly’s investigative report pointed out that, “Circularly, NIO has surpassed estimates since Weineng’s inception.” It added that Weineng is believed to have inflated Nio’s revenues by about 10% and net income by 95%. According to the report, at least 60% of the company’s 2021 revenues appear to be attributable to this related party.

Price Action: Hong Kong-listed Nio stock crashed nearly 10% during Wednesday’s trading session, while its peers Xpeng Inc XPEV and Li Auto Inc LI each cracked about 8%. According to data from Benzinga Pro, Nio shares closed 2.66% lower, limiting early US gains on Tuesday.

Read next: Two Nio workers die as test vehicle falls off building in China: Report

Photo by Dennis Diatel on Shutterstock

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