Shares of NIO Inc. were knocked down by a short-seller report on Wednesday alleging exaggerated financial results, even as the China-based electric vehicle maker said the report is without merit and contains numerous errors. The stock of the NIO fell 2.5% in morning trading, putting it on track for a third straight loss. It was down as much as 2.9% earlier in the session, and was down as much as 9.0% in premarket trading, according to FactSet's time and sales data.
It was down 0.4% at Wednesday s intraday high of $22.28, down just 0.4%.
Grizzly Research, which has bet that NIO's stock will fall, believes that sales to Wuhan Weineng Battery Asset Co., which Grizzly says was formed in late 2020 by NIO and a consortium of investors, has helped NIO inflate revenue by about 10% and net income by 95%.
The Grizzly Research report isn't without merit and contains numerous errors, unsupported speculations and misleading conclusions and interpretations regarding information relating to the Company, NIO said in a statement. The audit committee, including the Board of Directors, is looking at the allegations and is considering the appropriate course of action to protect the interests of all shareholders. NIO said in its most recent annual report that affiliate Wuhan Weineng is an equity investmentee of the company. Today, we reveal what we consider an audacious scheme by the NYSE-listed NIO, Grizzly Research said. The NIO is likely to use an unconsolidated related party to exaggerate revenue and profitability. Grizzly believes that Weineng held 40,053 batters as inventory as of September 2021, after disclosing that it had only 19,000 battery subscriptions, suggests that NIO flooded Weineng with extra batteries to inflate revenue.
Weineng allows the NIO to recognize revenue from the batteries they sell immediately instead of recognizing revenue over the life of the subscription, Grizzly said.
NIO stated in its response that it emphasizes its 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 conform to the rules and regulations of the New York Stock Exchange and the U.S. Securities and Exchange Commission and the New York Stock Exchange NYSE NIO s stock, which has now lost 9.5% amid a three-day losing streak, has plunged 31.2% year to date, while the S&P 500 index has fallen 19.8%.