Well, so much for the turnaround story brewing in Chinese electric vehicle makers on Tuesday. After initially trending higher, some of the hottest names are plunging deep into the red. Why? You can thank Kandi Technologies (NASDAQ:KNDI), the subject of a new short-seller report. Here is what you need to know about KNDI stock right now.
To start, what exactly is Kandi Technologies? Well, like peers Nio (NYSE:NIO) and Xpeng (NYSE:XPEV), it is a Chinese electric vehicle company. However, Kandi has taken a different approach to differentiate itself in a crowded market. Importantly, that means KNDI stock has represented the lower-cost EV market. Kandi Technologies focuses on accessible vehicles, instead of luxury models. That means in the United States, you can get a new Kandi vehicle for less than $10,000.
Initially, that was a huge source of appeal. Not only is KNDI stock an avenue to access the hot Chinese EV market, it also represented a way to play the broader consumer adoption of EVs in the U.S. Right now, one complaint is that vehicles from Tesla (NASDAQ:TSLA) are just too expensive. Without lower-cost cars, how will companies get customers to convert? Kandi Technologies and its K27 and K23 models could be an answer.
However, KNDI stock is absolutely plummeting today thanks to a short-seller report from Hindenburg Research. In the new release, Hindenburg makes some huge accusations. Essentially, the firm thinks that Kandi has been falsifying its revenue by faking sales to undisclosed affiliates. To back up those claims, Hindenburg says it did on-the-ground research that included inspecting Kandi facilities and the affiliate locations.
What is the bottom line here? Well, Hindenburg spells out the details of its alleged financial wrongdoings, but there is a more compelling story. Sometimes U.S. investors just do not know that much about foreign companies before investing.
KNDI Stock Plunges on Short-Seller Report
Unfortunately for EV bulls, short-selling reports have been unavoidable in recent weeks. You might remember that a Hindenburg report is behind the post-September plunge in Nikola (NASDAQ:NKLA). Add to that Citron Research reports slamming Nio and Electrameccanica Vehicles (NASDAQ:SOLO), and allegations abound.
Right now, the reality is that investors want everything that has to do with the all-electric world. That means seemingly every new offering in the EV space has been red hot. It also means the potential for downside is high.
Does the KNDI stock report really extend to the likes of Nio and Xpeng? That is the question that investors should be asking today. Prior to Wall Street digesting the Kandi Technologies allegations, Nio and Xpeng were climbing higher on record monthly deliveries. Li Auto (NASDAQ:LI), another Chinese EV company, was similarly surging.
Do your own research, and make sure you trust the business model at hand.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.