Who Exposed Nikola Motor short seller targets Chinese electric vehicle stash Kandi

A major short-selling company said the Chinese electric vehicle manufacturer Kandi Technologies (NASDAQ: KNDI) falsified revenue by recording transfers to affiliates as sales.

Hindenburg Research, the short seller whose charges against starting electric trucks Nikola (NASDAQ: NKLA) led to the departure of the founder of Nikola and a federal investigation, released a report on Monday stating that a large percentage of Kandi’s reported sales were actually transferred to affiliates.

If true, this would mean that Kandi reported revenue that he didn’t actually generate.

A Kandi K23 being charged. Kandi recently launched an effort to sell its electric cars in the United States. Image source: Kandi Technologies.

Here are the main allegations in the Hindenburg report:

• An on-site inspection showed that the reported address of Kandi’s largest customer, which accounts for about 55% of sales over the past 12 months, is a tiny building near the Kandi factory. The customer shares a phone number with a subsidiary note from Kandi.
• That tiny building previously housed another entity used by Kandi in a 2015 scheme to raise unearned subsidies for electric vehicles from the Chinese government by overstating its sales, Hindenburg said. Kandi was forced to cancel approximately $ 3.3 million in subsidies at the end of 2016 as part of a deal with the Chinese government.
• Another customer, who accounted for about 9% of last year’s sales, was once wholly owned by Kandi.
• Kandi’s pending sales days, a measure of the timing of revenue collection, are far greater than those of most of her colleagues, suggesting that it may be booking revenue she can’t collect.

Kandi has long been haunted by questions about her financial reporting and business plan. As the Hindenburg report notes, the U.S. Public Company Accounting Supervisory Board revoked the registration of Kandi’s longtime auditor in Hong Kong in 2016, after finding that the auditor had overlooked signs of potential fraud in Kandi’s accounting .

At press time, Kandi had not yet responded to the allegations.