Nio announced today that its internal review of previous short-selling allegations is now substantially complete, concluding that the allegations have not been substantiated.

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Nio said its internal review of previous short-selling allegations is now substantially complete, concluding that the allegations have not been substantiated.

In a report released June 28, a short seller called Grizzly Research said they believe Nio played a Valeant-like accounting game to inflate revenue and boost net income margins to achieve its goals.

They suspect that Nio likely used an unconsolidated related party, Wuhan Weineng (or Mirattery), to inflate revenue and profitability, saying it was reminiscent of the Philidor-Valeant relationship.

Nio announced on July 11 that the company's board of directors, after reviewing the allegations and at the recommendation of the company's management, decided to establish an independent committee in order to protect the interests of all shareholders.

The independent committee, comprised of independent directors Mr. Denny Ting Bun Lee, Mr. Hai Wu and Ms. Yu Long, was responsible for overseeing the independent investigation of the allegations contained in the short seller's report.

In a statement released today, Nio said the internal review was conducted by the independent committee with the assistance of third-party professional advisors, including forensic accounting experts from an international law firm and a reputable forensic accounting firm.

"The Internal Review is now substantially complete. Based on findings of the Internal Review, the Independent Committee has concluded that these allegations were not substantiated," Nio said.

It is worth noting that after the release of Grizzly's short report, several Wall Street investment banks issued research notes that continued to be bullish on Nio.

In a research note sent to investors in late June, Morgan Stanley analyst Tim Hsiao's team presented a "tactical idea" that the company's stock price was about to rise.

The team said that while "sluggish industry sentiment" had led to a sell-off, Nio's upcoming June sales announcement and second-half sales outlook were expected to send the stock rebounding, without even directly mentioning Grizzly Research's short-selling.

JPMorgan analyst Nick Lai's team said at the time that Nio's decline in the US was likely due to multiple allegations in the short-sale report, but they remained bullish on the company.

Deutsche Bank analyst Edison Yu's team said at the time that, in their view, some of the numbers being circulated were inaccurate and elements of Nio's business model were being grossly misunderstood.

"We do not see this detracting from the product super cycle Nio is embarking on and expect these concerns to fade fairly quickly," Yu's team said.

Wall Street analysts reaffirm positive views on NIO, refute short-selling allegations