Shares in the Nasdaq-listed company plunged nearly 63% in New York on Tuesday after Wolfpack Research released a hard-hitting, detailed report questioning EHang’s business.
The stock reduced its losses on Wednesday, jumping 35% more to around $ 62. But it remains well below Friday’s historic record of $ 129.80.
EHang (EH) classified the Wolfpack Research report as “misleading”. In a statement on Tuesday, the company said it believed the account “contains several errors, unproven statements and misinterpretation of information”
EHang added that “it will consider any course of action necessary and appropriate to protect the interests of the company and all of its shareholders”.
EHang is an autonomous passenger drone company founded in 2014. The company has made headlines over the years for its promise of autonomous taxis and went public in New York in 2019.
In a 33-page article, Wolfpack Research called the company “an elaborate stock promotion [scheme], built on widely manufactured recipes based on simulated sales contracts. ”
Wolfpack accused the Guangzhou-based startup of making up “its history with a collection of lies about its products, manufacturing, recipes, partnerships and possible regulatory approval for its supposed core business”.
EHang is just the latest Chinese company traded on the US stock exchanges to face increasing scrutiny after Luckin Coffee, another Chinese newcomer, admitted to making some of its sales figures. This month, Luckin filed for bankruptcy in the United States, less than a year after he was pulled out of Nasdaq.
And last year, iQIYI (IQ), the online streaming provider often referred to as “Netflix of China”, was also targeted by Wolfpack Research. The company alleged massive fraud at the Chinese company, and the SEC opened an investigation into its practices. IQIYI rejected the accusations, but said it was cooperating with US regulators.
Last October, iQiyi announced that it had conducted an internal review, which “did not reveal any evidence to substantiate the allegations”. The company did not immediately respond to a request for comment on the current status of the investigation on Wednesday, while the SEC declined to comment.
An EHang spokesman told CNN Business on Wednesday that the company “strongly believes that Wolfpack does not have a basic knowledge of [its] business and operations “, and that” this would refute Wolfpack’s claim in full “soon. The spokesman also referred to the company’s statement that it was” committed to maintaining the highest standards of corporate governance, as well as disclosure transparent and timely in accordance with the applicable rules and regulations of the United States Securities and Exchange Commission and the Nasdaq stock market. “
The SEC declined to comment on the EHang report.
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