Chinese drone company EHang shares plunged 63% after fraud claim
Investors are dumping shares in Chinese drone maker EHang, after a short-seller accused the US-listed company of fraud.
Shares of the Nasdaq-listed firm plummeted nearly 63% in New
York on Tuesday after Wolfpack Research released a scathing, detailed report questioning
EHang’s business.
EHang has slammed the report as “deceptive.” In a statement
Tuesday, the company said that it believes the account “contains numerous
errors, unsubstantiated statements, and misinterpretation of information.”
EHang added that it “will consider any necessary and
appropriate course of action to protect the interest of the company and all of
its shareholders.”
EHang is an autonomous passenger drone company founded in
2014. The company made headlines over the years for its promise of self-flying
taxis, and went public in New York in 2019.
In a 33-page paper, Wolfpack Research called the company “an
elaborate stock promotion [scheme], built on largely fabricated revenues based
on sham sales contracts.”
Wolfpack accused the Guangzhou-based startup of making up
“its story with a collection of lies about its products, manufacturing,
revenues, partnerships, and potential regulatory approval of its purported main
business.”
EHang is just the latest Chinese company trading on US stock
exchanges to face increased scrutiny after Luckin Coffee, another upstart from
China, admitted to fabricating some of its sales numbers. This month, Luckin
filed for bankruptcy in the United States, less than a year after it was
delisted from the Nasdaq.
And last year, iQIYI, the online streaming provider often
referred to as the “Netflix of China,” was also targeted by Wolfpack Research.
The firm alleged massive fraud at the Chinese company, and the SEC opened an
investigation into its practices. iQIYI has pushed back on the allegations, but
said that it was cooperating with US regulators.
Last October, iQiyi announced that it had conducted an
internal review, which “did not uncover any evidence that would substantiate
the allegations.” The company did not immediately respond to a request for
comment on the current status of the probe on Wednesday, while the SEC declined
to comment.
An EHang spokesperson told CNN Business the company
“strongly believes that Wolfpack lacks a basic understanding of [its] business
and operations,” and that “it would refute the Wolfpack allegation in full”
shortly. The spokesperson also referred back to the firm’s statement that it
was “committed to maintaining the highest standards of corporate governance, as
well as transparent and timely disclosure in compliance with the applicable
rules and regulations of the United States Securities and Exchange Commission
and the Nasdaq stock market.”
The SEC declined to comment on the EHang report.
EHang’s shares closed at $46.30 on Tuesday. Last Friday,
they hit an all-time high of $129.80.
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