EV maker NIO refutes short-seller Grizzly Research, calling their allegations has no merit

June 30, 2022 0 Comments

On Tuesday, a report by Grizzly Research accused Chinese EV maker NIO of “playing Valeant-esque Accounting Games” and “juiced its numbers by pulling forward 7 years of revenue”. Subsequently, NIO shares in Kong Kong fell about 11.4% on Wednesday, the biggest fall in almost two months. NIO’s shares in Singapore also dropped by 11% while its ADS dropped by 7.6%.

The EV maker has released a statement today calling the Grizzly report “without merit and contains numerous errors, unsupported speculations and misleading conclusions and interpretations.”

Grizzly Research is an investment consulting firm owned and operated by Siegfried G. Eggert, who has a background in the finance industry and has studied in the Beijing Technology and Business University. The firm does not shy away from admitting they may hold “long or short positions in the companies covered” and are “biased in our views.”

The main dispute of Grizzly Research’s report is on Wuhan Weineng, a company providing BAAS (Battery-as-a-Service) to NIO users, and the discrepancy in battery amounts. Due to NIO’s battery-swap model, users don’t have to purchase batteries with their NIO cars. Instead, they can subscribe to the BAAS program to use battery swap stations operated by Weineng, who purchases batteries from NIO.

According to Grizzly Research, Weineng has 19,000 subscribers and 40,053 batteries in inventory as of September 30, 2021. The discrepancy “leads us to believe that NIO has oversupplied Weineng by up to 21,053 batteries,” says Grizzly Research. The consulting firm believes this proves that NIO has been manipulating numbers to inflate its revenue and boost net income margins.

Many NIO investors have voiced their support for NIO by saying Grizzly Research has a “lack of understanding of the auto industry”. According to Felix, an investor working in Asia for 16 years and a YouTube content creator, what Grizzly Research claims as “pulling forward 7 years of revenue” equates to auto leasing, and it’s a common practice.

Rafi Khan, an NIO investor, calls the report disappointing, given “the poor quality of the false bear narrative”, adding that he is more confident in his NIO positions, according to his guest article on CnEVPost.

NIO said the company is reviewing the allegations and considering the appropriate course of action to protect the interests of all shareholders, per its statement. NIO shares fell 2.24% on Wednesday to close at $21.86 apiece. Last week, the electric car company’s test car crashed from a building in Shanghai, killing two people.

JP Morgan has released a note saying the company “remains positive on NIO,” and projects Nio to deliver approximately 70-80% QoQ sales growth in Q3 2022 and another ~30% in Q4 2022″, according to analyst Nick Lai.

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