NIO Inc. said Monday that it has formed a committee to look into recent allegations that the China-based electric vehicle maker is using an affiliate battery maker to boost financial results.
Short-seller Grizzly Research LLC had alleged on June 28 that sales to Wuhan Weineng Battery Asset Co., which was formed by NIO and a consortium of investors, helped NIO inflate net income by about 95% and revenue by 10%.
At that time, NIO
said the report was without merit and contained “numerous errors, unsupported speculations and misleading conclusions and interpretations” about the information. The EV maker said it was “reviewing” the allegations and would consider appropriate action to protect shareholders. Read more about the Grizzly report and NIO’s response.
The stock sank 8.4% in midday trading Monday, weighed down by concerns over new COVID-related restrictions imposed in China over the weekend. It was trading 5.3% below where it closed on June 29 after NIO first responded to the short-seller report.
On Monday, NIO said that, after reviewing the short-seller report, its board of directors, at the recommendation of management, decided to form a committee to oversee an investigation regarding the allegations. The committee has retained independent advisors to assist in the investigation, including retaining an international law firm and a forensic accounting firm.
“The company reiterates its continued and unwavering commitment to maintaining high standards of corporate governance and internal control, as well as transparent and timely disclosure in compliance with applicable rules and regulations,” NIO said in a statement.
NIO shares have gained 5.1% over the past three months, while the iShares China Large-Cap exchange-traded fund
has tacked on 2.3% and the S&P 500 index
has lost 12.6%.