Should you trade NIO shares now?

• NIO Inc (SGX: NIO) share price hits US$21.47 on Thursday (14 July 2022)
• The Chinese EV stock fell this week after it formed an independent committee to investigate recent allegations of profit fabrication
• The stock is up roughly 20% since it debuted on the Singapore Exchange in May 2022
• Keen to trade NIO shares? Open an account with us to start today.

NIO stock price: why did it fall?

NIO’s Singapore shares fell as much as 8.7% earlier this week, after its board of directors formed an independent committee to investigate a recent short-seller’s allegations that the company is exaggerating revenues and profits.

Among the claims in the report includes how NIO is likely using an unconsolidated related party named Wuhan Weineng (formed by NIO and a consortium of investors in late 2020) to boost its sales and profit figures.

‘We believe sales to Weineng have inflated NIO’s revenue and net income by ~10% and 95%, respectively. Specifically, we find that at least 60% of its FY2021 earnings beat seems attributable to Weineng,’ Grizzly Research noted in its report, published on 28 June 2022.

The investigation will be overseen by a committee comprising NIO independent directors Mr. Denny Ting Bun Lee, Mr. Hai Wu, and Ms. Yu Long.

‘The independent committee has retained independent professional advisors to assist with the independent investigation, including an international law firm and a well-regarded forensic accounting firm,’ the Chinese EV company said.

The company will provide updates on the independent investigation in due course consistent with the requirements of applicable rules and regulations of the Securities and Exchange Commission, the New York Stock Exchange, The Stock Exchange of Hong Kong Limited and the Singapore Exchange Securities Trading Limited.

What’s the outlook for NIO?

NIO’s Singapore shares, which are fully fungible with its American Depository shares (ADS), have increased approximately 20% since debuting on the Singapore Exchange (SGX) on 22 May 2022.

In terms of outlook, the youngest Straits Times Index constituent has an average rating of around ‘outperform’ and average target price of US$39.45, according to the latest SGX StockFacts data.

The target price equates to a 87% upside potential from Nio’s last traded price of US$21.14 on Thursday, 14 July 2022.

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