Author | Angie Li
Editor | Su Jianxun
According to the Financial Associated Press, on the evening of June 28, Beijing time, Grizzly Research, a well-known international short-selling agency, released a report accusing NIO of inflating its own revenue and exaggerating itself by using an unmerged affiliate, Wuhan Ninenglai. profitability.
The Grizzly Agency pointed out that Weilai has inflated its own income and net profit by about 10% and 95% respectively by overselling batteries to Wuhan Weineng. At least 60% of NIO’s earnings growth in fiscal 2021 will be contributed by NIO.
“NIO’s financials were inflated through a scheme to leverage unconsolidated related parties. By oversupplying batteries to NIO and pulling revenue early, NIO overstated $2.6 billion in the nine months to September 2021 RMB revenue (about 10% of revenue for the period). To make matters worse, the net loss that should be reported for the period was RMB 3.6 billion, which is double the actual reported loss by NIO.”
Earlier on June 29, Weilai responded that the report was full of a lot of false information and misreading of the information disclosed by Weilai. Weilai has always complied with the relevant rules of listed companies, and has started relevant procedures for this report. Please pay attention to the follow-up announcement.
On the 29th, Weilai was temporarily suspended in the Singapore stock market, and fell nearly 9% after the resumption; Hong Kong stocks fell by more than 10%.
According to the short report, NIO has been able to differentiate itself from major Chinese electric companies by investing in two areas: battery swapping systems and battery rental services (BaaS).
As of June 2022, NIO has completed more than 7.6 million battery replacements and deployed more than 981 battery replacement stations, which will grow to 1,300 stations by the end of 2022.
The power exchange business is directly managed by Weineng. Previously, in August 2020, NIO was jointly established by NIO, the government, CATL, etc. NIO held 19.8% of NIO’s shares. NIO’s chairman Shen Fei and general manager Lu Ronghua are all NIO executives. .
However, Wei Neng’s battery source is purchased from Weilai Automobile. Grizzly pointed out that without Weineng, it would take about seven years for NIO’s battery subscription business to generate full subscription revenue, but with Weineng, they can recognize revenue immediately. In other words, NIO can bring about 7 years of recurring revenue up front and recognize it immediately to artificially boost revenue growth without incurring any additional costs.
At the same time, the short-selling report shows that as of September 30, 2021, Weineng provided battery BaaS services to 19,000 users, which was regarded as real sales, but Weineng still held 40,053 battery inventories on September 30, 2021 .
“From an operational and structural point of view, NIO does not need any extra batteries. So this evidence leads us to believe that as of Q3 2021, NIO has oversupplied NIO with up to 21,053 batteries to whitewash its Financial status.”
Grizzly also estimates that NIO also oversupplied NIO with 15,200 batteries in the fourth quarter of 2021. “This action has a huge impact on Weilai’s profit and loss.”
Previously, Wall Street expected Weilai to lose 5.947 billion yuan in 2021, but Weilai announced a net loss of 3.007 billion yuan, 50% lower than expected (a difference of 2.94 billion yuan).
In addition, the Grizzlies report also pointed out that NIO’s failure to consolidate NIO’s finances can help NIO to erase 336 million yuan in battery depreciation expenses, thereby inflating the company’s profits.
There are also media reports that when Weilai accepts a capital injection of 7 billion yuan from Hefei City in 2020, there is a gambling agreement between Weilai and Hefei City, which includes:
1. NIO China submits an IPO within 48 months after receiving the investment, and completes the listing within 60 months; shareholders require NIO or Li Bin to redeem the company’s shares, which cannot lead to NIO or NIO China’s control Variety;
2. The controlling shareholders of NIO and NIO China should not be changed. If they change, the local government will require Li Bin to repurchase all shares;
3. If the IPO is not completed, or if the controlling stake changes, Li Bin will repurchase the shares of Weilai China, the redemption price is the total investment of Hefei strategic investors, and the interest will be calculated at an annual interest rate of 8.5%;
4. Require NIO China to achieve revenue of 120 billion yuan in 2024.
The deal puts pressure on NIO and creates significant risks for NIO shareholders. Although it is only mentioned that NIO needs to repurchase from local governments at an interest rate of 8.5%, there may be more terms in private that may hurt NIO shareholders.
On June 29, NIO released the latest announcement on the Hong Kong Stock Exchange, stating that the report was unfounded, and its information about the company included many errors, unfounded speculations, and misleading conclusions and interpretations. The company’s board of directors, including the audit committee, is reviewing the allegations and considering appropriate action to protect the interests of all shareholders. The Company will make further disclosures as and when required in accordance with the applicable rules and regulations of the US Securities and Exchange Commission, the New York Stock Exchange, the Stock Exchange of Hong Kong Limited and the Singapore Exchange Limited.
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