EHang Suffers Another “Shorting Attack” from a New York Based Research Group, Aim to Collapse Share Price 

First, it was New-York based Wolf­pack Research back in Feb­ru­ary 2021 who attacked EHang with poten­tial­ly libel­lous com­ments, includ­ing describ­ing the stock as “des­tined to crash and burn.” Its Short posi­tion went on to become a suc­cess. 

Now it is New-York based Hin­den­burg Research, found­ed in 2017 by the infa­mous Wall Street Short sell­er, Nate Ander­son. While he preys on stock mar­ket com­pa­nies under the guise of, “We look for man-made dis­as­ters float­ing around in the mar­ket and aim to shed light on them before they lure in more unsus­pect­ing vic­tims”, the truth of the mat­ter being, he seeks out vul­ner­a­ble stocks, where Ander­son uses “neg­a­tive research” to attack it, in the hope that investors will become so afraid, SELL, SELL, SELL is the shout, thus help­ing him make a lot of mon­ey on his already pro­cured Short posi­tion.

What is a ‘Short?’

A Short trade makes mon­ey if a stock falls. As such, if the share price of a com­pa­ny’s stock or bonds fall because of the neg­a­tive atten­tion gar­nered by a report, Hin­den­burg stands to prof­it. While some crit­i­cise short sell­ers for unfair­ly push­ing down prices with poten­tial­ly base­less alle­ga­tions, oth­ers insist they are a healthy part of the stock mar­ket.

To be heard amid the stock mar­ket cacoph­o­ny and instil fear into investors, the attack needs to be severe and harsh. Ander­son begins his EHang assault with the phrase “A Hol­low Order Book and Fake Sales make this Chi­na-Based eVTOL Com­pa­ny Last in Line for Take-Off.” 

EHang: Hol­low Order Book And Fake Sales Make This Chi­na-Based eVTOL Com­pa­ny Last In Line For Take­off

Amongst details to sup­port this claim, Ander­son states, “We found that 92+% of EHang’s claimed 1,300+ unit pre­order book is based on “dead” or “aban­doned” deals, failed part­ner­ships, and new­ly-formed cus­tomer enti­ties with no dis­cernible oper­a­tions.” 

And goes on, “EHang’s largest deal is a 1,000-unit pre­order from one of its pre-IPO investors, a biotech com­pa­ny called Unit­ed Ther­a­peu­tics, which rep­re­sents ~74% of EHang’s total pre­orders. The deal was ini­tial­ly signed in 2016. In 2020, the company’s CEO said she was look­ing for a much longer-range air­craft than what EHang offered, say­ing, ‘250 nau­ti­cal miles… is the sweet spot in terms of range,’ while EHang’s EH216 offers a range of just 19 miles (30km).”

Adding, “Unit­ed Ther­a­peu­tics qui­et­ly sold its entire USD109 mil­lion stake in EHang by Feb­ru­ary 2021. In Novem­ber 2021, in its last pub­lic com­ments on EHang, the VP of Drone Deliv­ery for Unit­ed Ther­a­peu­tics said, “I don’t think any­one could say right now that they [EHang] have a cer­ti­fi­able con­fig­u­ra­tion in terms of air­craft design. A for­mer EHang employ­ee said the deal was dead.” 

These are seri­ous and high­ly dam­ag­ing claims, if true, but when you dig into Anderson’s rep­u­ta­tion, he is very much on the U.S Depart­ment of Jus­tice (DOJ) radar. 

For exam­ple, livemint.com wrote a blis­ter­ing attack on Ander­son in Feb­ru­ary. The web­site begins, “A vari­ety of alle­ga­tions against the com­pa­ny’s pur­port­ed­ly ‘fraud­u­lent’ activ­i­ties have now sur­faced on social media plat­forms under the trend­ing hash­tag ‘Hin­den­burgEx­posed’. Indeed, as sev­er­al Twit­ter users point­ed out, the US com­pa­ny was under inves­ti­ga­tion by the Depart­ment of Jus­tice.” 

Videos and posts shared under the ‘Hin­den­burg exposed’ hash­tag also not­ed that the com­pa­ny was known as a ‘ponzi hunter’, a tag that has also been used by sev­er­al west­ern media organ­i­sa­tions. livemint con­tin­ues, “As one post put it, they were not spe­cial­ists who exposed fraud­u­lent activ­i­ty, they them­selves were frauds.” 

The web­site remarks, “The US short sell­er is among dozens of promi­nent firms that are being inves­ti­gat­ed by the DOJ (since 2021) for poten­tial­ly ille­gal trad­ing tac­tics. The probe seeks to estab­lish whether short-sell­ers used ille­gal trad­ing tac­tics to dri­ve down stock prices by shar­ing dam­ag­ing research reports ahead of time. 

“Accord­ing to sev­er­al media reports from last year, fed­er­al pros­e­cu­tors have seized hard­ware, trad­ing records and pri­vate com­mu­ni­ca­tions as the inves­ti­ga­tion con­tin­ues. It is per­ti­nent to note how­ev­er that the firm has not been accused or charged with any wrong­do­ing at present.” 

Last Week’s Inau­gu­ra­tion of EHang’s First Euro­pean UAM Cen­tre in Spain

In a New York Mag­a­zine fea­ture about Ander­son from Jan­u­ary 2022, there are some poignant com­ments. The jour­nal­ist, Andrew Rice, writes, “(His) Short sell­ing start­ed as a secret side hus­tle. Ander­son would post anony­mous­ly on the crowd­sourced web­site Seek­ing Alpha. He called him­self Hin­den­burg Research to sound more author­i­ta­tive, but it was just him.” 

Rice con­tin­ues, “There is lit­tle doubt that short researchers often have undis­closed rela­tion­ships with inter­est­ed par­ties, for exam­ple, angry ex-employ­ees look­ing to take down their old firm.”

Then adds, “Activist-research firms, includ­ing Hin­den­burg, tend to get eva­sive when it comes to some basic ques­tions, like who sup­plies them with infor­ma­tion and who, if any­one, backs their posi­tions. (It takes seri­ous mon­ey to make seri­ous mon­ey as a short.) The activists hunt in packs, lead­ing inevitably to alle­ga­tions of con­spir­a­cy and stock manip­u­la­tion. Adding to the murky atmos­phere, some of them, like Ander­son, start off by post­ing anony­mous­ly. He describes that as a prac­ti­cal defence: ‘You are just one guy with no assets, just doing research on your own, squar­ing off against incred­i­bly well-resourced, pow­er­ful cor­po­ra­tions and invest­ment firms.’

“He declines to describe his stock-trad­ing strate­gies in detail, except to say he col­lab­o­rates with a group of rough­ly ten “investors” — pre­sum­ably wealthy indi­vid­u­als or finan­cial insti­tu­tions, although he won’t name names.”

Link to New York Mag­a­zine Fea­ture

https://nymag.com/intelligencer/2022/01/nathan-anderson-hindenburg-research-short-selling.html

You must feel sor­ry for EHang. It is such a mar­mite stock. The fun­da­men­tal­ist investors loathe it, the vision­ary ones love it. Not only is this the sec­ond time a bla­tant Short assault has tak­en place on the com­pa­ny’s share price, but being Chi­na-based, apart from its actu­al investors, does any­one real­ly care in the West? For any neg­a­tive attack feeds into the nar­ra­tive, “Are the Chi­nese trust­wor­thy?”

There­fore, it is encour­ag­ing to see the eVTOL com­pa­ny com­ing out fight­ing.

Under the guise of an inter­view with EHang’s Founder and CEO, Huazhi Hu, a press release has been released with the head­line ‘How EHang Plans to Shape the Future of Urban Air Mobil­i­ty’. This is fol­lowed by the intro, “Huazhi Hu shares his thoughts on EHang’s strengths and strate­gies.”

______________________________________________________________________________________________________________________________________________________________________________________________

Huazhi Hu

Can you tell us about EHang’s busi­ness plan post-cer­ti­fi­ca­tion and whether you have any com­ments on the short-sell­er report pub­lished by Hin­den­burg Research on Novem­ber 7, 2023?

I bear the respon­si­bil­i­ty of help­ing the pub­lic and investors bet­ter under­stand the Company’s mis­sion, tech­ni­cal capa­bil­i­ties, and busi­ness plans, as well as pre­vent them from being mis­led by rumours and false infor­ma­tion in the stock mar­ket. How­ev­er, I gen­uine­ly believe that the most effec­tive way to defeat rumours is to deliv­er excel­lent oper­at­ing and finan­cial results and let rumours and mis­in­for­ma­tion crum­ble on their own. There­fore, I want to share more with you about the Company’s busi­ness plan after obtain­ing TC.

The Com­pa­ny is cur­rent­ly mak­ing steady progress in advanc­ing pro­duc­tion cer­ti­fi­ca­tion work for EH216‑S. We have wit­nessed stronger cus­tomer demands for our EH216‑S after obtain­ing TC for var­i­ous use cas­es in aer­i­al tourism, urban trans­porta­tion, aer­i­al logis­tics, emer­gency ser­vices, etc. We are also in con­tact with some well-known cus­tomers, part­ners, aim­ing to attract more orders in the near future.

Simul­ta­ne­ous­ly, the Com­pa­ny has been active­ly expand­ing our com­mer­cial oper­a­tions for autonomous eVTOLs to diver­si­fy our mar­kets and strength­en our order and rev­enue base. It’s also worth not­ing that all the air­craft will be sub­ject to oper­a­tional restric­tions at ini­tial stage for safe­ty, akin to oth­er prod­ucts that have spe­cif­ic usage envi­ron­ment and con­di­tions. Nev­er­the­less, EHang will grad­u­al­ly lift these oper­a­tional lim­i­ta­tions with the ulti­mate goal to real­ize broad­er com­mer­cial oper­a­tion sce­nar­ios across urban areas.

As we sell and deliv­er more eVTOLs per cus­tomers’ requests and steadi­ly expand our com­mer­cial oper­a­tions in the future, our cash flow will improve and we are con­fi­dent that the Com­pa­ny can gen­er­ate pos­i­tive cash flow in the next few quar­ters.

How does EHang dif­fer­en­ti­ate itself from its glob­al peers?

I found­ed EHang to make safe, autonomous, and eco-friend­ly air mobil­i­ty acces­si­ble to every­one. Unlike some glob­al eVTOL peers, EHang adopt­ed a dif­fer­ent prod­uct strat­e­gy and did not set out to make pilot­ed aer­i­al vehi­cles, such as a lighter ver­sion of heli­copter with human pilots. At EHang, we have tak­en a unique approach on air­craft design with our EH216‑S, which is inten­tion­al­ly small­er in size, opti­mized for short-to-medi­um-range flights, and well-suit­ed for urban envi­ron­ments. What’s more, our air­craft offer flex­i­ble deploy­ment options due to small­er size, elim­i­nat­ing the neces­si­ty for exten­sive ground infra­struc­ture. The EH216‑S is specif­i­cal­ly designed to address the require­ments of low-alti­tude short-to-medi­um-range air trans­porta­tion needs for the pub­lic with­in urban loca­tions or scenic areas.

Our com­mit­ment to sim­plic­i­ty in design is a cor­ner­stone of our safe­ty approach. We believe that a robust mul­ti-rotor design enhances oper­a­tional safe­ty. Besides, our EH216-S’s safe­ty has been rig­or­ous­ly test­ed and val­i­dat­ed by Type Cer­tifi­cate (“TC”), ensur­ing that it meets reg­u­la­to­ry stan­dards and require­ments. Con­verse­ly, tilt-rotor designs for larg­er pilot­ed 5‑seated air­craft, devel­oped by most of our peers, intro­duce addi­tion­al com­plex­i­ties and poten­tial cer­ti­fi­ca­tion risks, along with chal­lenges relat­ed to sub­stan­tial ground infra­struc­ture, and seat occu­pan­cy.

At EHang, we have cho­sen to embrace autonomous fly­ing, where our EH216‑S oper­ates along­side pre-deter­mined flight routes enabled by our com­mand-and-con­trol sys­tem plat­form to ensure safe­ty and effi­cien­cy, espe­cial­ly when oper­at­ing at a large scale. This approach sig­nif­i­cant­ly reduces the risks of acci­dents caused by human errors. We firm­ly believe that autonomous eVTOLs are the key to bring­ing air mobil­i­ty to the pub­lic. In fact, our first pas­sen­ger-car­ry­ing mod­el unveiled in Jan­u­ary 2016, the EHang 184, was already ful­ly autonomous.

In con­clu­sion, our small­er, adapt­able air­craft design, empha­sis on safe­ty and design sim­plic­i­ty, com­mit­ment to autonomous fly­ing and clus­ter man­age­ment, posi­tion us as an indus­try leader, cater­ing to the needs of urban areas and ush­er­ing in a new era of UAM.

What is EHang’s approach towards R&D?

EHang’s R&D efforts are strate­gic and in line with the Company’s over­all busi­ness devel­op­ment strat­e­gy and have not result­ed in exces­sive expen­di­tures. We high­ly val­ue the con­fi­dence our investors have in us and are com­mit­ted to not wast­ing investors’ mon­ey on mon­ey-pit R&D projects with unpromis­ing com­mer­cial prospects. Our com­mit­ment to mak­ing every pen­ny well spent push­es us to iden­ti­fy and pri­or­i­tize our eVTOL prod­ucts and tech­nolo­gies that are crit­i­cal to our com­mer­cial suc­cess, while tak­ing full advan­tages of China’s expan­sive, cost-effi­cient sup­ply chain net­work.

For exam­ple, autonomous vehi­cles are safer and more effi­cient for urban trans­porta­tions if we have an intel­li­gent com­mand-and-con­trol cen­ter to man­age all vehi­cles. As such, we worked tire­less­ly to build a team of ded­i­cat­ed and rea­son­ably com­pen­sat­ed engi­neers, who have since accu­mu­lat­ed a wealth of expe­ri­ence in design­ing large-scale com­mand-and-con­trol sys­tems with us. Today, com­mand-and-con­trol tech­nol­o­gy for autonomous eVTOLs is one of EHang’s lead­ing core tech­no­log­i­cal strengths.

Our R&D approach has deliv­ered excel­lent results at rea­son­able costs. As of March 31, 2023, we have built a large UAV-relat­ed patent port­fo­lio con­tain­ing 331 patents issued in Chi­na, mak­ing EHang a glob­al leader in autonomous eVTOL R&D with a cumu­la­tive R&D expen­di­ture of approx­i­mate­ly RMB655.1 mil­lion since 2017. More­over, our R&D strat­e­gy helped us obtain the world’s first TC for autonomous eVTOL prod­uct from the Civ­il Avi­a­tion Admin­is­tra­tion of Chi­na in 2023. Our TC cer­ti­fi­ca­tion is the most pow­er­ful proof that our R&D strat­e­gy is both sen­si­ble and suc­cess­ful.

Going for­ward, as we are a list­ed com­pa­ny with bet­ter access to cap­i­tal mar­kets and have obtained TC for EH216‑S, we plan to invest in R&D more aggres­sive­ly and ramp up pro­duc­tion to strength­en our tech­nol­o­gy lead­er­ship in the air mobil­i­ty indus­try. How­ev­er, finan­cial pru­dence will con­tin­ue to guide our approach to R&D activ­i­ties as we pur­sue our long-term growth strate­gies, no mat­ter what our glob­al peers are doing with their finan­cial and oth­er resources.

For more infor­ma­tion

www.ehang.com

(Top image: EHang)