On November 8th, the "manned aircraft" giant Yihang Intelligent responded to the short selling report, firmly denying the allegations in the report that the company misled investors in terms of orders and sales, and will take appropriate actions to protect the interests of the company and its shareholders. Due to doubts from investment firm Hindenburg about the company's financial data, the stock price of Yihang Intelligent, which is listed in the United States, fell significantly by 12.7% on Wednesday.
Hindenburg releases a short selling report: Yihang's sales orders are fake
According to public information, Yihang Intelligent is a leading global urban air traffic technology enterprise committed to providing safe, automated, and environmentally friendly air traffic for everyone. Yihang Intelligence released the world's first manned autonomous flight vehicle in 2016, leading a new industry in urban air transportation worldwide. In October 2023, Yihang Intelligent EH216-S unmanned manned aircraft system successfully obtained the Type Certificate ("TC") issued by the Civil Aviation Administration of China, which is also the world's first unmanned electric vertical takeoff and landing ("eVTOL") aircraft type certification.
Investment firm Hindenburg Research released a short selling report on Yihang Intelligence on Tuesday. After reviewing the report, the reporter found that the reasons for Hindenburg's short selling of Yihang Intelligence include low R&D investment and inaccurate financial data.
Hindenburg Short Report
The report believes that drones are highly dependent on research and development investment, with Yihang's total research and development investment of only $97 million, while its competitors Joby and Archer Aviation have already invested $762 million and $381 million in research and development. In addition, Yihang Intelligence's competitors have hundreds of millions of cash, while Yihang Intelligence only has $44.9 million in cash left, which is insufficient to support its operations in the capital intensive aviation industry.
For the highly praised "eVTOL" certification recently obtained by Yihang Intelligence, the report believes that this certification is accompanied by many flight restrictions, but has not been fully disclosed to investors. These restrictions render most of its potential commercial uses ineffective, including restrictions on flying in densely populated areas, shared airspace, and areas invisible to ground personnel. Yihang Intelligent claims to gradually lift restrictions, but according to Chinese "eVTOL" experts, Yihang Intelligent's flagship models will require billions of dollars in redesign and completely different certification categories to avoid these restrictions.
The report also questioned the sales data of Yihang Intelligence. The report believes that the largest order before the company went public was signed in 2016, with a biotechnology company called United Therapeutics booking 1000 aircraft, accounting for 74% of the total pre order volume of Yihang Intelligence at that time. And United Therapeutics is also an investor in Yihang. But in 2020, the CEO of United Therapeutics stated that she was looking for an aircraft with a range longer than that provided by Yihang. She said, "250 nautical miles is the best range point, while Yihang's EH216 has a range of only 19 miles (30 kilometers)." In February 2021, United Therapeutics quietly sold all of its shares in Yihang Intelligence, valued at approximately $109 million.
The second largest order for Yihang is a 100 aircraft, worth $30 million, from a company in Indonesia. But the company was established one day before the signing of the contract, with a registered capital of only $34000.
Regarding the report content, Yihang Intelligent's response is that the report contains false statements and misunderstandings about the company's business operations and financial situation, highlighting the shallow and incomplete understanding of the company's industry and business operations by short sellers. Yihang Intelligent stated that the cumulative orders and pre orders received by the company in the past reflect customers' strong interest and real demand for eVTOL products. These orders are based on signed contracts and are planned to be delivered according to customer requirements after obtaining regulatory approval.
Being short for the second time
Previously, in February 2021, short selling agency Wolfpack Research released a report accusing Yihang Intelligent of issues such as trading contracts and false production facilities. Subsequently, Yihang Intelligent released a statement stating that founder Hu Huazhi called the report a false accusation, but its stock price fell 62.69% on the same day.
After the occurrence of short selling, Hu Huazhi, the founder of Yihang Intelligence, stated that the quality of short selling reports was poor, with numerous loopholes, and there was no attempt to understand technology and business models. Based on fake research, it contained many errors, unconfirmed statements, and misunderstandings of information. The Guangzhou production base of Yihang Intelligence covers an area of 8750 square meters and is equipped with production facilities for autonomous flight vehicles. The factory located in Yunfu, Guangdong is also under construction, with an initial annual production capacity of 600 manned autonomous flight vehicles planned.
Poor performance and stock price decline
On December 12, 2019, Yihang Intelligent landed on NASDAQ and became the world's first listed urban air transportation enterprise. After going public, the stock price remained stable. But at the end of 2020 and early 2021, the company's stock price continued to soar. It has been rising from around $10 to over a hundred dollars.
Stock price trend chart of Yihang Intelligent after its listing
Prior to the release of the short selling report by Wolfpack Research, the stock price of Yihang Intelligent reached as high as $129, and has since been continuously declining. By May 2021, the stock price had dropped to $20.
The continuous downturn in company performance has also become the main reason for the decline in stock prices. The company still had a revenue of 180 million RMB in 2020, while the annual revenue in 2021 and 2022 has dropped to 57 million RMB and 44 million RMB.
