Short-selling firm Grizzly Research has published a report on Nio, in which it accuses the company of “an audacious scheme” reminiscent of the Philidor-Valeant relationship, alleging that Nio is “likely using an unconsolidated related party to exaggerate revenue and profitability.” The firm claims its investigation has found “Weineng might be to NIO what Philidor was to Valeant. Just as Philidor aided Valeant in habitually making numbers, NIO has curiously exceeded estimates since establishing Weineng. We believe sales to Weineng have inflated NIO’s revenue and net income by ~10% and 95%, respectively. Specifically, we find that at least 60% of its FY2021 earnings beat seems attributable to Weineng.” Grizzly adds in its report: “Chinese government entities have redeemed US$2B from NIO and may collect another US$6.7B. With NIO’s cash balance of just US$8.2B. We believe shareholders risk being materially diluted in future periods.” In morning trading, Nio shares trading in New York are down 52c, or 2%, to $22.43.
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