Tesla Inc TSLA, rival Chinese EV maker Nio Inc NIO, refuted short-seller bearish promises on its stock that alleged the company of inflating its income and profitability.

What Took place: On Tuesday, Grizzly Analysis published a report that claimed Nio is very likely working with an unconsolidated linked party, Wuhan Weineng, to exaggerate its income and profitability.

Grizzly Exploration titled the report: “We Imagine NIO Performs Valeant-esque Accounting Games to Inflate Earnings and Improve Net Money Margins to Fulfill Targets.”

See Also: Why Alibaba, Nio, Chinese Peers Are Sliding In Hong Kong Today

Nio’s Response: Denying Grizzly’s claims, Nio stated that it “is without the need of merit and includes a lot of mistakes, unsupported speculations and deceptive conclusions and interpretations.”

Nio explained it will make additional disclosures required by the stock exchanges in the U.S. and Hong Kong, incorporating that “the Company’s board of administrators, together with the audit committee, is examining the allegations and thinking about the proper program of action to shield the interests of all shareholders.”

Why It Matters: The Grizzly research report pointed out that “NIO has curiously exceeded estimates considering that setting up Weineng.” It added that Weineng is believed to have inflated Nio’s revenue by about 10% and net income by 95%. At minimum 60% of the company’s 2021 earnings feel attributable to this related occasion, according to the report.

Price Action: The Hong Kong-shown inventory of Nio crashed approximately 10% all through the investing session on Wednesday, whilst its peers Xpeng Inc XPEV and Li Auto Inc LI cracked about 8% just about every. According to information from Benzinga Professional, Nio shares closed 2.66% reduced, paring early gains in the U.S. on Tuesday.

Read through Subsequent: Two Nio Staff Die As Test Automobile Falls Off Developing In China: Report

Photograph by Dennis Diatel on Shutterstock