EHang Holdings Limited (EH) Mischaracterized its Lead Product and Misled Shareholders Regarding its Financial Success
During the class period, EHang touted the viability of its aerial vehicle technology and its proliferation into Europe, North America and China, and its financial success in numerous, detailed press releases. However, EHang failed to disclose to investors that: (i) its purported regulatory approvals in Europe and North America were for use of its product as a drone and not for carrying passengers; (ii) its relationship with its purported primary customer is a shame; (iii) it only collected a fraction of its purported sales since its stock began trading on the NASDAQ; and (iv) its manufacturing facilities were practically empty and lacked evidence of advanced manufacturing equipment or employees.
On February 16, 2021, citing "extensive evidence," analyst Wolfpack Research reported that Ehang is "an elaborate stock promotion, built on largely fabricated revenues based on sham sales contracts with a customer [Shanghai Kunxiang Intelligent Technology Co., Ltd.] who appears to us to be more interested in helping inflate the value of its investment in EH … than about buying its products." Wolfpack also reported that it "obtained Chinese court records which show that EH's ADRs may already be in serious jeopardy due to legal issues in China." On this news, EHang's share price fell $77.79, over 62%, to close at $46.30 per share, injuring investors.
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