Nio Analyst Dismisses Short Seller Allegations: Why They're Bullish On Chinese EV Stock

Zinger Key Points
  • CFRA remains bullish on Nio following a new report by Grizzly Research.
  • On Tuesday, Grizzly accused Nio of shady accounting practices.

Shares of Chinese electric vehicle maker Nio Inc - ADR NIO were falling Wednesday following a new report by short seller Grizzly Research.

On Wednesday morning, CFRA analyst Lim Jian Xiong said the allegations in the short seller report have no impact on his outlook for Nio shares.

Grizzly's Allegations: In its report on Tuesday, Grizzly accused Nio of playing "accounting games to inflate revenue and boost net income." The firm said Nio is taking a book out of the Valeant Pharmaceuticals playbook in using a third-party relationship to manipulate its accounting.

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"While this rapid growth is impressive on the surface, our investigation has found Weineng might be to Nio what Philidor was to Valeant. Just as Philidor aided Valeant in habitually making numbers, Nio has curiously exceeded estimates since establishing Weineng," Grizzly said.

In response to the report, Nio released a statement denying Grizzly's claims.

"The report is without merit and contains numerous errors, unsupported speculations and misleading conclusions and interpretations regarding information relating to the company," the automaker said Wednesday. 

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Nio Analyst Responds: Xiong said Wednesday that weakness in Nio's share price in response to the Grizzly Research report is a buying opportunity for long-term investors.

"We think Nio's EV portfolio expansion (3 SUV and 2 sedan models in 2022) will sustain its strong revenue momentum, drive an improvement in operating leverage, and support our projected turnaround in Nio's business by Q4 2023," Xiong said.

Xiong reiterated his Buy rating and $35 price target for Nio.

Benzinga's Take: Nio plans to make additional disclosures to the U.S. Securities and Exchange Commission that will hopefully address some of the conclusions that Grizzly reached in its report.

Given Nio shares are only down 2.6% Wednesday afternoon, it seems the market agrees with Xiong's take that the Grizzly Research report is nothing to be concerned about.

Photo courtesy of Nio. 





Posted In: Analyst ColorAsiaShort SellersPrice TargetReiterationMarketsAnalyst RatingsCFRAGrizzly ResearchLim Jian XiongSprucepoint Capital