Cenntro Electric (NASDAQ:CENN) is a new public electric commercial vehicle (ECV) manufacturer that closed its reverse merger with Naked Brand Group at the end of last year. I wrote about how CENN stock could be undervalued on Feb. 1, 2022, when the stock was at $1.73 per share. Since then, the Australia-based company’s stock has actually moved higher on Nasdaq to $1.91 as of April 8. But on April 4, Cenntro made a major announcement that I think is a red flag.
It disclosed that BDO Audit Pty Ltd (“BDO”), its independent accounting firm prior to the reverse merger, resigned as the new company’s auditor. Apparently, it did not want to continue working with the new company. It’s hard for me to understand how a company will turn down business. I consider this a red flag, and investors should be very careful going forward with any investment in CENN stock.
Be Careful With CENN Stock
Moreover, Cenntro still has yet to produce any financial information to the public, including anything that has been audited. For example, there is still no 10-K filing for Naked Brand Group as of the end of last year, despite the closing of the merger.
Granted, it filed a Form F-3 prospectus on Jan. 6 describing Cenntro’s plans to produce EVs. This also apparently includes a plant in Jacksonville, Florida that will produce 50,000 EVs with only 34 employees. (I’m not buying it). But even if you do believe in its future EV production, there still is no financial filing for 2021 from the company with all three required financial statements: income, balance sheet and cash flows.
However, Cenntro’s website now has a slide presentation dated April 2022. It shows that the company claims to have “$250 million+ cash” on hand. That represents half of its almost $500 million market capitalization. It also says that it produced or sold 9,900 “ECV Parc” (vehicles?) in 2021 in the U.S. and is on track to produce 24,900 during 2022. In Europe, it claims to have produced or sold 104,100 during 2021 and will do 162,900 during 2022. There simply is no independent verification of any of these numbers.
It’s theoretically attractive to know that about half of the $500 million market capitalization is cash. But there is no way to know for certain how much money, including revenue, the company is on track to produce this year without audited financial statements. Investors should be very careful here until this data is available.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.