EHang tries to reverse stock plunge caused by ‘false allegations’

EHang is continuing to push back following a damaging – and it says false – report issued by a firm that recommended shorting the stock. The report from Wolfpack Research, which recommended shorting the stock, has tanked the company’s market cap.

Without being in China, it’s difficult to see exactly what’s going on under the hood. But a February 16 report by Wolfpack Research contained a number of serious allegations against the company. In fact, the headline to its report called EHang “A Stock Promotion Destined To Crash And Burn.”

The day before that report was released, EHang stock was at $124.09. Today (February 22) at close, it was at $46.30.

A stellar climb

EHang had, until the Wolfpack Research report, been a darling of investors. The stock, which in early November was $8.05, had been soaring on regular reports and videos that its EH216 passenger-carrying Autonomous Aerial Vehicle (AAV is EHang’s preferred term) was pushing ahead in the world of Urban Air Mobility.

The appeal was understandable. The EH216, a 16-motor drone built to carry two passengers, is likely the most advanced passenger-carrying autonomous aerial vehicle out there at the moment. Test flights in multiple countries have been carried out without incident, and there were regular announcements of EHang’s participation in Urban Air Mobility working groups.

Everything was looking up… until suddenly it wasn’t.

Wolfpack Research

We’re not going to get into the specifics of the Wolfpack Research report. If you’re interested, you can find it here. But it contained many allegations – most of which EHang has been refuting – which concerned investors. EHang has now announced, btw, that it plans to commence legal action against Wolfpack.

EHang has also been in the position of trying to regain the significant ground it lost in that single day through trying to gain control of the narrative again. Multiple news releases have been issued since the stock plunge, with most focussing on pushing back on those allegations.

The latest from EHang

Now, another release has come from EHang. Now that you’ve got some context, we paste it in its entirety below:

GUANGZHOU, China, Feb. 22, 2021 (GLOBE NEWSWIRE) — EHang Holdings Limited (Nasdaq: EH) (“EHang” or the “Company”), the world’s leading autonomous aerial vehicle (“AAV”) technology platform company, today provides additional details concerning its sales contracts with a customer, and further refutes the false allegations made by Wolfpack Research, a short-seller.

Shanghai Kunxiang Intelligent Technology Co., Ltd. (“Kunxiang”) is only one of EHang’s many customers and it is not a related party of EHang. Set forth below are details concerning EHang’s sales to Kunxiang.

1. In 2019, EHang generated revenues of RMB29.2 million (US$4.2 million) from Kunxiang, representing 24% of its total revenues for the same period.

2. These revenues were entirely related to the two sales contracts: (i) a contract dated February 1, 2019 for the sale of 3 passenger-grade AAVs and (ii) a contract dated June 3, 2019 for the sale of 20 passenger-grade AAVs.

3. The table below sets out the details relating to the Company’s sales to Kunxiang in 2019:

4. Please see below for additional details concerning the 22 units of passenger-grade AAVs sold to Kunxiang in 2019:

5. Approximately 71% of the revenues the Company generated from sales to Kunxiang in 2019 has been collected.

6. With EHang’s passenger-grade AAVs, Kunxiang has explored businesses in a number of areas, including aerial sightseeing, emergency transportation and aerial firefighting in different locations.   According to Kunxiang and publicly available information, Kunxiang has conducted series of trial flight activities of EH216 in 17 cities across China, including Changchun, Yantai, Suzhou, Turpan, Shenyang, Hangzhou, Yangjiang, Panjin, Harbin, Lanzhou, Tianjin, Ningbo, Shijiazhuang, Dalian, Xi’an, Hengyang and Fuxin, among others in additional to its internal trial flight activities. Most of these activities have been reported by media. Detailed information can be found in a video of selected public trial flight activities at Kunxiang’s Douyin (the Chinese version of TikTok) account (ID: 2211017075) and via this YouTube channel (link).

7. Kunxiang is a customer that focuses on aerial tourism as its core business. As a leader in AAV technology, EHang has developed solutions for a broad range of applications, such as aerial transportation, logistics, aerial tourism, aerial firefighting, smart city management and aerial media.   EHang has attracted a number of customers and strategic partners, including private companies, multinational companies and local governments both in China and abroad. As previously communicated, Kunxiang is no longer the largest customer of EHang in the fiscal year ended December 31, 2020.

EHang is in the process of taking legal actions against Wolfpack Research for its malicious act and false allegations in order to protect the interests of the Company and its shareholders.