NIO denied accounting allegations in a report by short-seller Grizzly Research.
Qilai Shen/Bloomberg
Shares of Chinese electric-vehicle maker NIO dropped more than 12% in Hong Kong on Wednesday after the company denied a report published Tuesday by short-seller Grizzly Research claiming the company is exaggerating revenue and profit margins.
In its report on Tuesday, Grizzly Research said that NIO (ticker: NIO) is playing “accounting games to inflate revenue and boost net income margins to meet targets.”
The report examined the company’s creation of Wuhan Weineng Battery Assets Company. The company was created in 2020 and includes NIO, EV battery giant Contemporary Amperex Technology Co. (300750.China) and others. The business owns the batteries that NIO drivers can, essentially, pay a monthly fee for in what NIO calls BaaS, short for battery as a service.
NIO pioneered separating the car purchase from the battery purchase. A NIO buyer can choose to buy an EV for a lower price and then pay for the battery on a monthly basis. It’s a way to lower the cost of an EV and make it more comparable to buying and filling up a gasoline-powered car.
NIO recognizes sales when it sells batteries to Weineng. That’s the issue Grizzly has with the company. The business arrangement is disclosed in NIO’s financial reports. Grizzly didn’t respond to a request for comment about its report.
NIO didn’t respond to Barron’s directly. In a statement, NIO said that the report “is without merit and contains numerous errors, unsupported speculations and misleading conclusions and interpretations regarding information relating to the company.”
Curiously, the report was available Tuesday afternoon. NIO shares, however, fell about 2.6% in Tuesday trading. It was a tough day for EV makers. Tesla (TSLA) shares dropped 5%.
The reaction to the report seems to have been delayed a day. Shares in NIO fell 11.4% in Hong Kong on Wednesday to 164.10 Hong Kong dollars (US$20.19). In U.S. premarket trading, American depositary receipts of NIO dropped 7.6%.
S&P 500 and Dow Jones Industrial Average futures were down 0.2% and 0.1%, respectively.
NIO added that it was reviewing the allegations and considering an appropriate course of action to protect shareholders’ interest, and will make additional disclosures in due course.
Write to Lina Saigol at [email protected]
