(Yicai Global) June 29 — Shares in Nio plummeted as much as 10 percent in Hong Kong today after the Chinese electric car startup was accused of overstating its income by using accounting tricks in a recent short selling report. The report has misinterpreted the data and is based on incorrect information, Nio told Yicai Global today.
Nio’s Hong Kong-traded stock [HKG:9866] plunged 9.2 percent to trade at HKD169.50 (USD21.60) as of 1 p.m. China time today. Earlier in the day it sank to HKD167.80. In the US, its share price [NYSE:NIO] closed down 2.57 percent at USD22.36 yesterday. The US stock’s value has doubled in the past six weeks, giving Nio a market capitalization of USD37.2 billion and making it one of the world’s most valuable carmakers.
“Nio is likely using an unconsolidated related party to exaggerate revenue and profitability,” US short seller Grizzly Research said in a report released yesterday. Grizzly believes that sales to Wuhan Weineng, a joint venture in which Nio holds a 19.8 percent stake, have inflated Nio’s revenue and net income by 10 percent and 95 percent respectively, the report said.
The EV startup has launched procedures against the short seller and will issue an announcement later, the Hefei, eastern Anhui province-based company told Yicai Global.
Wuhan Weineng was set up in August 2020 by Nio and several other companies including battery giant Contemporary Amperex Technology to provide battery rental services for Nio car owners.
In the four months after Wuhan Weineng was formed, the JV contributed CNY290 million (USD43.3 million) to Nio’s revenue, but this soared to CNY4.1 billion (USD611.7 million) in 2021, the report said. And it was from the fourth quarter of 2020 that Nio’s financial results began to far exceed market expectations. The Wall Street Journal, for instance, expected the EV startup to lose CNY6 billion (USD895.1 million) in 2021, but it only lost half this amount.
Nio’s net loss widened more than eight-and-a-half fold in the first quarter from the same period a year earlier to CNY1.8 billion (USD 268.6 million), although this was a narrowing of 16.2 percent from the previous quarter, according to its latest financial report released on June 9. Revenue jumped 24.2 percent to CNY9.9 billion (USD1.5 billion).
Editor: Kim Taylor