Shares of Nio (NYSE:NIO) stock are in the green this morning after electric vehicle (EV) competitor Tesla (NASDAQ:TSLA) reported its third-quarter earnings. Tesla has a major presence in China. Thereofre, NIO stockholders can get a sense of how the Chinese EV industry is faring with the report.
For the quarter, Tesla’s revenue came in at $21.45 billion, while the consensus analyst estimate was $21.96 billion. When asked about China, Elon Musk stated that “China is experiencing a recession of sorts,” which he believes is mostly attributable to the property markets. In addition, the CEO expects 50% annual growth in vehicle deliveries over a “multi-year horizon.”
That bodes well for Nio. However, investors will want to keep Oct. 24 in mind, as that is the lead plaintiff deadline for the class action lawsuit against the company.
NIO Stock Investors, Mark Your Calendars for Oct. 24
The lawsuit stems from a short report published by Grizzly Research on June 28. Among other things, the report accused Nio of making misleading statements and hiding adverse material information concerning its battery asset management provider, Wuhan Weineng. The class period for the lawsuit is between August 2020 and July 2021.
In the report, Grizzly accuses Nio of incorrectly recognizing battery revenue from Weineng. Weineng is the entity in charge of receiving monthly subscription revenue for the company’s battery swap system and battery-as-a-service (BaaS) program. The short seller alleges that Weineng recognizes battery revenue right away instead of throughout a subscription’s lifetime, which is thought to be around seven years. As a result, Grizzly believes that Nio “inflated its revenue and net income by ~10% and 95%, respectively” for the nine months ended September 2021. Meanwhile, the lawsuit notes that Nio recognized “enormous depreciation savings” through Weineng.
Following the release of the report, Nio hired an independent committee to investigate the allegations. The committee hired an international law firm and a forensic accounting firm to assist with the investigation.
On Aug. 26, the company put out a press release, saying that the independent committee had concluded that the allegations in the report “were not substantiated.” No other details were disclosed, such as how the investigation was conducted. Furthermore, there have been no updates from Nio concerning the short report since then.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions 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.