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Summary
- Stocks of Chinese drone maker EHang Holdings (NASDAQ:EH) dropped by 62.69 per cent to US$46.30.
- The plunge came on the heels of short-seller Wolfpack Research’s report that questioned the claims of the Chinese manufacturer.
- The report claimed that the NASDAQ-listed Chinese drone manufacturer is nothing but an “elaborate stock promotion”
Large sum of investors’ wealth was wiped out after stocks of Chinese drone maker EHang Holdings (NASDAQ:EH) drastically dropped by 62.69 per cent to US$46.30 on Tuesday.
The plunge came on the heels of short-seller Wolfpack Research’s report that questioned the claims of the Chinese manufacturer.
The investment research firm shorted the stock and said it is destined to “crash and burn”.
Investors aligned with the report, sending EHang stocks plummeting about eight times its normal daily volume.
Allegations Against EHang
The report claimed that the NASDAQ-listed Chinese drone manufacturer is nothing but an “elaborate stock promotion” and is erected on “fabricated revenues”, which are built on false sales contracts based on “lies”. These fabricated sales are aimed at inflating the value of the stocks.
Wolfpack claimed that Ehang’s chief customer, as per records, is a purported organization called Shanghai Kunxiang Intelligent Technology Co., Ltd, which is also an active participant drumming up the price of the Chinese company.
The Chinese autonomous aerial vehicle creator has refuted the findings of the report, calling it “unsubstantiated” and “misinterpretation of information”
Eh stock’s 3-month performance (Source: Refinitiv, Thomson Reuters)
What Does EHang do?
Guangzhou-based EHang is developing autonomous aerial vehicle (AAV) technology platform or air taxis that aims to solve future of transportation problems of smart cities.
A 2018 study by Morgan Stanley claims that the addressable market of Urban Air Mobility (UAM) will hit US$1.5 trillion global by 2040.
Before Tuesday’s plunge, Ehang stock had climbed 450 per cent in 2021 alone.
