Nio’s shares lose US$6.1 billion value in Hong Kong, Singapore rout as short-seller Grizzly Research claims carmaker ‘juices revenue’

  • Nio used a venture to ‘juice its numbers by pulling forward seven years of revenue,’ said Grizzly Research, which has a short position that profits from Nio’s falling prices
  • The Grizzly report ‘is littered with lots of false information and misinterpretation of the company’s disclosures,’ Nio said, adding that it had taken steps against it

Shares of the Chinese electric-car maker Nio plunged in New York, Singapore and Hong Kong trading after the short-seller Grizzly Research published a report claiming that the Shanghai-based start-up had inflated its revenue figures.

Nio shares tumbled 11.4 per cent to HK$165.50 in Hong Kong on Wednesday, their biggest fall in almost two months, and sank 11.4 per cent in Singapore. The stock dropped 2.6 per cent overnight on the New York exchange.

Nio used its Wuhan Weineng battery venture to “juice its numbers by pulling forward seven years of revenue,” playing “Valeant-esque accounting games to inflate revenue and boost net income margins,” akin to the accounting scandal that led to the 2016 collapse of the Canadian pharmaceutical firm Valeant, said Grizzly Research, divulging that it has a short position that profits from any tumble in Nio’s stock price.

The Grizzly report “is littered with lots of false information and misinterpretation of the company’s disclosures,” Nio said in response to the Post’s request for comment, adding that it “strictly abides by the standards that are applicable to publicly traded companies,” and has “commenced relevant procedures” against the report.

Grizzy Research is owned and operated by Siegfried G. Eggert, based in Philadelphia. The firm maintains its own private investigators in China to conduct site visits and interviews with locals, suppliers, customers and other stakeholders, according to its website.

The declines in Nio’s shares across the two Asia exchanges wiped out about US$8.5 billion in the value of the seven-year-old company. The short-selling report came hot on the heels of a mishap last week in Shanghai, where a Nio electric vehicle lost control during a test drive, ending up in two deaths.

Shares of China‘s electric carmakers had been on a tear in recent weeks, after authorities unveiled billions of yuan worth of subsidies, incentives and cash handouts to steer buyers towards so-called new energy vehicles including battery-powered electric cars, hybrids and hydrogen fuel-cell automobiles.

The largesse was aimed at reviving the manufacturers and component suppliers that serve the automotive industry in the world’s largest vehicle market, after a two-month lockdown in Shanghai – dubbed China’s Motown for its 11 per cent contribution to the country’s industry – stretched supply chains close to breaking point.

Most automotive stocks took a breather from their surge on Wednesday, dropping sharply. Xpeng fell 7.4 per cent to HK$125.10 in Hong Kong, while Li Auto retreated 8.8 per cent to HK$144.30. Geely Automobile Holdings, the largest privately owned carmaker in China and the largest shareholder of Daimler, plunged 8.2 per cent to HK$17.50.

Author: Cheryl Heng, SCMP

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