NIO Inc (NYSE:NIO) shares are trading lower Tuesday after Grizzly Research issued a bearish report on the Chinese EV maker titled, "We Believe NIO Plays Valeant-esque Accounting Games to Inflate Revenue and Boost Net Income Margins to Meet Targets."
The report claims that Nio is likely using an unconsolidated related party, Wuhan Weineng, to exaggerate its revenue and profitability.
"NIO has curiously exceeded estimates since establishing Weineng," Grizzly Research claimed in the report.
The firm believes Weineng has inflated Nio's revenue by about 10% and inflated the company's net income by 95%. At least 60% of the company's 2021 earnings seem attributable to this related party, according to the report.
Grizzly Research also suggests that Nio shareholders are unknowingly exposed to margin call risk as a result of a personal loan that the company's CEO secured using the "NIO Users Trust," which holds around 50 million Nio shares.
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NIO Price Action: Nio has a 52-week high of $55.13 and a 52-week low of $11.67.
The stock was down 2.37% at $22.41 at press time, according to data from Benzinga Pro.
Photo: courtesy of Nio.
