Nio Shares Climb as Company Refutes GIC Lawsuit Claims

In a significant legal development for the electric vehicle sector, Chinese automaker Nio has strongly rebuffed a lawsuit filed by Singapore’s sovereign wealth fund GIC, calling allegations of revenue inflation “groundless.”

The Shanghai-based EV manufacturer saw its shares recover in multiple markets following the announcement. Hong Kong-listed shares climbed 2.4 percent to HKD50.45 after suffering a 9 percent plunge the previous day. Similarly, Singapore-listed shares rose 3.2 percent by midday, while Nio’s New York stock closed marginally higher at $6.83 after an initial 7.8 percent drop at market open.

A Nio representative told Yicai that the lawsuit stems from claims originally made in a June 2022 short-selling report by Grizzly Research, not from recent company operations. The representative emphasized that an independent investigation into those allegations had already been conducted and completed.

“An independent board committee completed an investigation on the Grizzly Research report with the support of an international law firm and a forensic accounting firm in August 2022,” the Nio spokesperson explained. “The investigation found the report lacked factual basis and contained numerous errors, unfounded speculations, and misleading conclusions and interpretations.”

GIC’s lawsuit, filed in New York, targets both the company and key executives including CEO Li Bin (also known as William Li) and former CFO Fang Wei. The Singaporean fund claims it suffered investment losses due to allegedly inflated revenue figures reported by Nio.

The case highlights the complex relationship between global investors and Chinese EV manufacturers as the sector faces increased scrutiny. Nio noted that it had previously addressed an inquiry from the U.S. Securities and Exchange Commission regarding the same allegations in September 2022, after which the regulatory body took no further action.

A source familiar with the company pointed out that Nio’s triple listing status means its accounting practices have undergone review by regulatory authorities in three different jurisdictions – the United States, Hong Kong, and Singapore – suggesting robust oversight of its financial reporting.

The timing of GIC’s investment and subsequent lawsuit is noteworthy. The sovereign wealth fund acquired approximately 54.4 million American depository shares of Nio between August 2020 and July 2022, a period marked by extreme volatility in Nio’s stock price. During this timeframe, Nio shares surged from around $19 in August 2020 to a peak of $66.99 in January 2021, before declining significantly.

When the Grizzly Research report was originally published in June 2022, market reaction was relatively muted, with Nio’s New York shares falling just 2.6 percent. The more significant decline in share value came months later, beginning in September 2022, which the company attributes to broader macroeconomic challenges and delivery shortfalls rather than concerns about financial reporting.

By late December 2022, Nio’s stock had reached a yearly low of $9.80 per share, representing a substantial loss for investors who bought during the peak periods.

The legal battle comes at a critical juncture for China’s electric vehicle industry, which faces growing international competition and regulatory challenges despite maintaining strong growth in domestic markets. Nio, alongside peers like XPeng and Li Auto, has been positioning itself as a premium alternative to Tesla in the Chinese market while pursuing international expansion.

For GIC, one of the world’s largest sovereign wealth funds with approximately $700 billion in assets under management, the lawsuit represents an unusual public confrontation with a portfolio company, highlighting the significant financial stake involved.