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Shares of Chinese drone company EHang fell 63% after fraud complaint

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Investors are dumping shares of Chinese drone maker EHang after a short seller accused the US-listed company of fraud.

Shares of the Nasdaq-listed company fell nearly 63% in New York on Tuesday after Wolfpack Research released a scathing, detailed report questioning EHang’s business.

EHang called the report “misleading”. In one declaration On Tuesday, the company said it believed the account “contained numerous errors, unsubstantiated statements and misinterpretation of information.”

EHang added that he “will consider any necessary and appropriate course of action to protect the interests of the company and all of its shareholders.”

EHang is an autonomous passenger drone company founded in 2014. The company makes the headlines over the years for his promise of autonomous taxis, and went public in New York in 2019.

In a 33-page article, Wolfpack Research called the company an “elaborate inventory promotion [scheme], based on revenues largely manufactured on the basis of bogus sales contracts.

Wolfpack accused the Guangzhou-based start-up of inventing “its history with a collection of lies about its products, manufacturing, revenues, partnerships and potential regulatory approval for its alleged core business.”

EHang is just the latest Chinese company trading on US exchanges to face closer scrutiny after Cafe Luckin, another Chinese upstart, admitted to fabricating some of his sales figures. This month, luckin filed for bankruptcy in the United States, less than a year after its delisting from the Nasdaq.

And last year, iQIYI, the online streaming provider often referred to as “China Netflix,” was also target by Wolfpack Research. The company alleged massive fraud in the Chinese company and the SEC opened an investigation into its practices. iQIYI rebuffed the allegations, but said it was cooperating with US regulators.

Last October, iQiyi ad that it had carried out an internal review, which “did not reveal any evidence to support the allegations”. The company did not immediately respond to a request for comment on the current state of the investigation on Wednesday, while the SEC declined to comment.

A spokesperson for EHang told CNN Business that the company “strongly believes that Wolfpack does not have a basic understanding of [its] business and operations ”, and that“ this would refute Wolfpack’s allegation in its entirety shortly ”. The spokesperson also recalled the company’s statement that it was “committed to maintaining the highest standards of corporate governance, as well as transparent and timely disclosure, in accordance with applicable corporate rules and regulations. the United States Securities and Exchange Commission and the Nasdaq action. market.”

The SEC declined to comment on the EHang report.

EHang shares closed at $ 46.30 on Tuesday. Last Friday, they hit a historic high of $ 129.80.

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