In the red-hot flying car, or eVTOL (electric vertical takeoff and landing) aircraft market, growth investors have found a number of stocks with significant upside momentum, many of whom have received improved outlooks as a result of key advancements in this sector. One such stock that’s been on many investors’ radar of late is that of EHang (NASDAQ:EH), with EH stock still up more than 250% from its 52-week low, seen roughly one year ago.

That said, EHang is the latest target of short-seller firm Hindenburg Research, which published a new short report on the company, slamming the eVTOL maker on a number of fronts. Hindenburg alleged that:

• EHang’s order book doesn’t reflect reality (its biggest order is likely abandoned).
• The company has been under-investing in research and development (R&D).
• A capital raise done by the company was led by an individual with a potentially scrupulous background.
• Initial restrictions on test flights are more cumbersome than its peers and could require a significant amount of capital if a redesign is needed.
• EHang’s valuation is simply too steep relative to its peers.

These are certainly some big allegations and are a key reason why EH stock is down more than 16% at the time of writing.

Countering these allegations, EHang released a response to this report today. Let’s dive into what this response said and what investors may want to hone in on.

EH Stock Plunges on Short Seller Report

As it turns out, EHang’s response, which was released earlier today, has done little to help its stock price as investors look for additional clarity around many of these concerns.

Essentially, EHang highlighted that this short seller report contains “untrue statements and misrepresentation of information regarding the Company’s business operations and financial conditions.”

The rebuttal goes on to say that

“[The] accumulated orders and pre-orders the Company has received in the past reflected the strong interest and genuine demand from customers for EHang’s innovative electric vertical take-off and landing (“eVTOL”) products, which are based on signed contracts and planned for delivery after obtaining regulatory approvals, as per customers’ requests. The Company will continue to provide updates on its order pipeline from time to time, including significant new orders it received after obtaining the certificate for unmanned eVTOL from the Civil Aviation Administration of China.”

Overall, it appears EHang is not backing down from how the company reports its order bookings and suggests that these orders are real. Accordingly, given the company’s Chinese jurisdiction, it remains to be seen what kind of investigation will be done (if any) around the company’s reporting practices.

As is the case with many foreign entities, particularly in China, differing regulatory environments and opaqueness when it comes to reporting standards can lead to much higher risk being priced into such stocks. Today’s decline in EH stock appears to represent that reality.

On the date of publication, Chris MacDonald did not have (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.