On the evening of June 28th, US short seller Grizzly Research (grizzly bear) released a report saying that NIO Inc. (09688) had exaggerated income and net profit margin through accounting to meet market expectations. Grizzly Bear's move prompted a number of international banks to refute, including Morgan Stanley (Morgan Stanley), JP Morgan (JP Morgan), Daiwa Capital Markets (Daiwa Capital Markets) and other institutions, all issued reports saying they did not support the conclusions of the Grizzly Research report.
International banks believe that Grizzly Research's query about BaaS is a misreading of the BaaS model and confusion of related concepts and data.
According to public data, as of 2021Q3, Wuhan Suneng Battery assets Co., Ltd. (hereinafter referred to as "Weineng") holds 40053 BaaS battery packs and packages 19000 BaaS orders into ABS financing for derivatives issuance. Vernon can use the remaining battery or future battery (from new BaaS subscribers) as the base asset to continue to issue more ABS to expand the future portfolio.
Grizzly Bear mistakenly understood that Weineng had 40053 battery packs but only 19000 BaaS orders, so all inferences related to oversold battery packs, inflated revenue and gross profit are not valid.
Grizzly Research's short report points out that as of September 2021, NIO Inc. and Weineng had sold 40, 000 batteries through related party transactions, while according to the ABS prospectus, the number of BaaS orders for ABS was 19, 000, suggesting that NIO Inc. oversold batteries to Weineng, thus exaggerating their operating income and net profit.
On this issue, Daiwa Capital Markets issued a report on the rationality of the relevant business data. Among them, Weineng disclosed its BaaS order number (19000) for the purpose of ABS financing, while 19000 BaaS orders should only be used for financing part of the users, and can not represent the total number of BaaS orders. At the same time, Daiwa Capital Markets estimates that based on NIO Inc. 's sales (84000 units) between the fourth quarter of 2020 and the third quarter of 2021, NIO Inc. could have 40, 000 BaaS users (nearly 50 per cent BaaS purchase rate) as of September 2021.
In the JP Morgan report, analysts suggested that Vernon could use the remaining battery or future battery (from new BaaS subscribers) as a base asset to continue to issue more ABS to expand its future portfolio. The relevant disclosure shows that every battery held by Weineng has a corresponding base subscriber.
According to public information, Yuneng currently has 16 institutional shareholders, including NIO Inc. China, which has a 19.8 per cent stake in the former. Under the composition of a large number of shareholders, it is not easy for NIO Inc. to unilaterally control Weineng to conduct false transactions. Moreover, according to Weineng's public information, it is more inclined to maintain operational independence.
NIO Inc. 's listing documents in Hong Kong and Singapore and the business logic of the BaaS model are clearly stated in the 2021 financial report.
With regard to NIO Inc. 's BaaS service, NIO Inc. explained in detail the business model in his prospectus to the HKEx in February this year. According to the prospectus, after buying the battery pack from NIO Inc., Weineng has the right to charge consumers a monthly rental fee for the battery asset throughout its life cycle. In the course of the listing of the HKEx, the business model and the related revenue from the sale of battery packs to Vernon have been confirmed to have conducted due diligence and conducted regular audits of the financial statements as required by regulators.
People in the industry said that power exchange and battery leasing similar to BaaS are actually the business model of battery banks, which is more common in the domestic new energy industry. It is also a common practice for car companies to set up related companies for this purpose. Among them, Geely, Changan, BYD and other car companies will also lay out the power exchange business one after another this year to cooperate with the vehicle sales business. If according to Grizzly Research, the similar business model of domestic new energy car companies no longer exists, Grizzly's doubt, there is obviously a serious misunderstanding of the business model of Battery Bank.
In fact, more and more innovative enterprises are more likely to be attacked by short sellers after landing in the capital market. According to industry statistics, Tesla, Inc. is one of the stocks that have been shorted more times at present.
Judging from past information, Grizzly Research has shorted Chinese innovative enterprises for many times, including SPI Green Neng Bao, DouYu International Holdings Limited, Renesola Ltd and other brands. According to Grizzly Research's official website, almost half of the short-selling reports involve Chinese innovative companies.
Other professional investors believe that short sellers like Grizzly Research specifically target companies in a period of rapid growth, use some professional data to influence inexperienced investors and take advantage of stock price changes on the day of the short report to make a profit by one-day trading.
On NIO Inc. 's forward market performance, Morgan Stanley released a report saying: although the depressed mood in the industry has led to a decline, with the help of a strong product line, we believe that NIO Inc. 's rising sales in June and a good sales trend in the second half of the year will restore investor confidence in the company's operations and trigger a rebound in the stock price.
It is reported that NIO Inc. launched its first car, the ET7, this year, which is the first model that NIO Inc. 's NT2 technology platform has come off the line. Compared with similar fuel vehicles or plug-in hybrid vehicles, NIO Inc. ET7 has better power performance and higher intelligent configuration. In addition, the smart electric medium and large SUV ES7, which is offline on the NT2 technology platform, also made its global debut in June. With the launch of new cars and the upgrading of old models, NIO Inc. 's overall sales are expected to further improve.
When refuting the release of the report, Morgan Stanley found NIO Inc. still attractive and gave an overweight rating. Coincidentally, Daiwa Capital Markets gave NIO Inc. a buy rating over the next 12 months.