The allegation: Nio is accused of manipulating revenue through its battery joint venture Weineng (Mirattery). CEO William Li and former CFO Feng Wei are named as defendants.
Details
āļø Precedent case: Singaporeās sovereign wealth fund GIC has filed a lawsuit in New York against Chinese EV maker Nio. Itās the first time a state fund has sued a Chinese company listed abroad over alleged accounting fraud.
š Battery dispute: Nioās Battery-as-a-Service model lets customers rent batteries instead of buying them. According to GIC, Nio booked the entire battery value as immediate revenue instead of spreading it over the rental term ā allegedly over US$600 million was recognized too early.
š Stock drop: After the lawsuit became public, Nioās shares fell up to 14%, wiping out around US$2.4 billion in market value. The stock now trades near US$6, far below its US$62 peak in early 2021.
šø GICās losses: The fund bought about 54 million Nio ADS between 2020 and 2022 and estimates losses of up to US$2 billion. GIC claims Nio effectively controlled Weineng despite officially owning only 19%.
š§¾ Nioās response: The company denies the accusations, saying they stem from a 2022 short-seller report that was independently reviewed and found baseless. Nio insists it complies with U.S. GAAP. The case has been temporarily suspended pending an earlier class action.
Big Picture
The lawsuit adds pressure on Chinese companies listed overseas to improve transparency and accounting standards. More Western-listed Chinese firms are being pushed to open their books. For Nio, the timing couldnāt be worse ā falling margins, slowing demand, and tighter regulation. Investor confidence has evaporated almost as quickly as the billions in lost market value.
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