“We Are Short” – Wolfpack Research Crashes Ehang Shares On Report

Shares of EHang Holdings crashed on Tuesday, down more than 62%, following a report from short-seller Wolfpack Research.

Wolfpack released the short report titled “EHang: A Stock Promotion Destined to Crash and Burn,” when the stock was up more than 450% for the year. Shortly after the report was released, shares of the Chinese “flying car” company plummeted.

The research firm accuses the company of orchestrating “an elaborate stock promotion, built on largely fabricated revenues based on sham sales contracts with a customer who appears to us to be more interested in helping inflate the value of its investment in EH (i.e., pump EH’s stock price) than actually buying its products.” 

The firm continued: “EH has perpetuated its story with a collection of lies about its products, manufacturing, revenues, partnerships, and potential regulatory approval of its purported main business, an “autonomous” aerial vehicle (“AAV”) ridesharing network.” 

Wolfpack said, “EH’s relationship with its primary purported customer is a sham.” 

Government records and credit reports show that EH’s major customer is Shanghai Kunxiang Intelligent Technology Co., Ltd. (hereinafter referred to as “Kunxiang”). We have gathered extensive evidence including behind-the-scenes photographs, recorded phone calls, and videos of on-site visits to EH’s various facilities, as well as Kunxiang’s offices which lead us to believe that Kunxiang signed sham sales contracts to benefit its investment (stock price) in EH:

1. Kunxiang has an exaggerated physical presence and its real operations appear to be a fraction of what is claimed. Out of the 3 addresses listed on Kunxiang’s website, one is a hotel with no Kunxiang presence, one is a 13th floor address of an 11-story building, and the last one had only one Kunxiang employee in the office on a weekday afternoon.

2. To the extent Kunxiang actually does sell vehicles, it did not want to sell EH’s products to us. When asked, the only employee on-site at Kunxiang, who claimed to be the finance manager, had no hesitation voicing his disapproval of the EH216, and instead offered their own, supposedly much higher quality products for sale.

3. Kunxiang appears to be a willing participant in EH’s stock promotion. According to the same finance manager at Kunxiang, Kunxiang made an undisclosed RMB100 million (~$14 million) pre-IPO investment in EH, which leads us to believe its true motive for signing these shambolic contracts was to benefit its investment, which is worth ~RMB473 million (~$68 million) today.1

4. As is common with a sham customer, SAIC files and national credit reports show that Kunxiang was established just 9 days before it signed a RMB450 million (~$65 million) sales contract with EH. Kunxiang had only RMB10 million (~$1.4 million) of registered capital, rendering far too thinly capitalized to actually fulfill this purported sales contract. Nonetheless, Kunxiang signed another RMB30 million (~$4.3 million) contract with EH four months later.

Following the report, Nasdaq-listed EHang issued a statement calling Wolfpack’s report “deceptive.” 

The 33-page report published by Wolfpack can be viewed in full here. 

While Wolfpack has made it known it’s short the stock, this could open up a can of worms for the research company if the millions of users at r/WallStreetBets band together and decide to squeeze the low floater. 

In recent weeks, r/WallStreetBets has been on a tear in squeezing penny stocks, biotech stocks, and pot stocks.