Nio, a Chinese electric vehicle manufacturer aiming to compete with Elon Musk's Tesla corporation, has launched an independent probe into a short-seller report that claims the company has exaggerated its income by upwards of $300 million.
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Last month, CNBC shared details about the company's new E7 SUV, which debuted as the brand's competition against Tesla's Model Y and Model X in China is heating up. Per the report:
Nio is trying to differentiate its electric SUV by highlighting the technology features of the vehicle. This includes Nio Autonomous Driving, the company’s system that powers some semi-autonomous driving features. The company also highlighted its infotainment system which includes a 23-speaker surround-sound configuration in the car.
The E7 is available with three different ranges, based on battery size, before it requires a recharge -- 485 kilometers [301.4 miles], 620 kilometers [385.3 miles], and 930 kilometers [577.9 miles].
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Now, however, just a month later, the rapidly growing vehicle manufacturer is facing serious controversy due to the aforementioned short-seller report. One recent article shared details about the ongoing situation, which first came to light at the end of June:
On June 28, short-seller institution Grizzly Research published a report claiming that NIO is likely using Wuhan Weineng Battery Asset Co. Ltd., an unmerged related party, to exaggerate its revenue by 2.617 billion yuan ($388.8 million) and its net profit by 1.777 billion yuan. In the short seller report, Grizzly’s allegations involved the company’s BaaS battery rental service model, Wuhan Weineng, which is responsible for operating the service under NIO, and relevant executives of NIO, including CEO William Li.
It is worth noting that Nio denied any wrongdoing almost immediately. On June 29, the company asserted that the report was filled with "many mistakes, unconfirmed guesses and misleading conclusions and explanations related to the company."
Furthermore, Nio confirmed that its internal audit committee was reviewing the allegations and considering the most appropriate course of action to protect shareholders.
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Nio has retained the services of a forensic accounting firm to assist with its internal probe. In a statement, the company shared:
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's (NYSE: NIO)Â stock prices did take a dip amid the allegations, with the market suffering a 7.5 percent drop in trading as of midday Monday. At the time of publication, however, stock is up 2.13% on the day Wednesday, July 13.
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