Hall of Shame
EHang Holdings, Ltd. (EH US)
EHang Holdings Limited is an autonomous aerial vehicle technology platform company. The Company design, develop, manufacture, sell and operate AAVs and their supporting systems and infrastructure for a broad range of industries and applications, including passenger transportation, logistics, smart city management and aerial media solutions.
The Company listed on the US NASDAQ in December 2019 raising US$41.06M.
February 16, 2021 Wolfpack Research issued a report "EHang: A Stock Promotion Destined to Crash and Burn". Wolfpack believed that EHang was a fraud using fabricated revenues, a bogus client and misleading PR to promote its stock. The main findings in its report were:
- EHang’s only disclosed distributor, Shanghai Kunxiang, appeared to have signed bogus contracts with EHang, intended to inflate EHang’s stock price. Wolfpack noted that:
- Out of the 3 addresses listed on Kunxiang’s website, one was a hotel with no Kunxiang presence, one was a 13th floor address of an 11-story building, and the last one had only one Kunxiang employee in the office on a weekday afternoon.
- SAIC files and national credit reports showed that Kunxiang was established just 9 days before it signed a RMB450M (approx.US$65M) sales contract with EHang. Kunxiang had only RMB10M of registered capital, rendering it far too thinly capitalized to actually fulfil this purported sales contract. Nonetheless, Kunxiang signed another RMB30M contract with EHang four months later.
- Kunxiang appeared to be a willing participant in EHang’s stock promotion. Kunxiang made an undisclosed RMB100M pre-IPO investment in EHang, which led Wolfpack to believe its true motive for signing these shambolic contracts was to benefit its investment, which was worth approx. RMB473M on the report date.
- Wolfpack visited EHang’s corporate headquarters/main manufacturing facility in Guangzhou and found that EHang’s supposed manufacturing facility lacked advanced manufacturing equipment, a basic assembly line, and was practically empty on a weekday afternoon.
- EHang appeared to be significantly misleading investors about its purported “manufacturing facility” in Yunfu. EHang claimed it had already begun production at the Yunfu factory in December 2020. Wolfpack visited it in January 2021 and found that it was a long way from being ready for production. It added that there were many questions about EHang’s purported government support for this facility, as well as its own financial stability and long-term prospects from a financial perspective and regulatory perspective.
- EHang’s Guangzhou “Design and Testing Centre” appeared to be a fairly small, dilapidated concrete area with one EHang helipad.
- Massive discrepancies in price between EHang’s two sales contracts with Kunxiang. In February 2019 Kunxiang agreed to pay RMB450M for 3 EH216s (i.e., RMB150M per unit), almost 100x the price it usually pays. Four months later Kunxiang signed another contract to purchase 20 EH216s for a total price of RMB 30M. Wolfpack believed this was for the effect these contracts would have on EHang’s stock price. Wolfpack noted that between September 10, 2019 and October 31, 2019, EHang filed a confidentiality request with the SEC to redact the prices on these contracts, likely because the prices were so absurd that they would ruin EHang’s credibility if seen by investors or competitors.
- EHang’s rapidly growing accounts receivable balance was further evidence to Wolfpack that much of its revenues were fabricated; EHang had only collected a total of approx. US$3.6 million in cash from its purported sales since its IPO; i.e. 20% of its reported revenues.
- Typical of a stock promotion, in just 14 months as a publicly traded company, EHang’s PR team had put out 50 press releases. However, in Wolfpack's opinion, EHang’s constant stream of press releases were easily proven untrue. It said that EHang's R&D budget and CapEx rendered many of its claims impossible at face value. EHang consistently made different claims regarding regulatory approvals in the English and Chinese versions of its press releases. In English, EHang made false claims of commercial approval of its vehicles, the EH216, by Chinese regulators. In its Chinese press releases, EHang made false claims of commercial approvals by regulators in the US, Canada, and Europe.
- EHang Guangzhou, which holds most of EHang’s assets and operations, had 95% of its equity frozen by a Chinese court as part of an ongoing lawsuit filed by one of EHang’s creditors.
February 16, 2021 EHang issued a short press release which it stated the Company strongly believed that the report contains numerous errors, unsubstantiated statements, and misinterpretation of information.
February 17, 2021 The company posted comments and responses from Huazhi Hu, its founder, on its website in a Q&A format; "How EHang Pioneers the Future of Urban Air Mobility" calling it - A Brief Explanation on EHang’s Mission, Technological Advancements and Why the Short-Seller is Wrong.
Wolfpack: EHang - A Stock Promotion Destined to Crash and Burn, 16 Feb 2021
EHang: How EHang Pioneers the Future of Urban Air Mobility, 17 Feb 2021
EHang: Annual Report YE - Dec.2019
EHang: Prospectus, 11 Dec 2019.