The unmanned aerial vehicle (UAV) industry growth has soared in recent years. Since the Federal Aviation Administration (FAA) approved hundreds of new exemptions for companies to operate drones in the U.S. in 2016, many new UAV companies are emerging.
Among them, a Chinese company, EHang (亿航, NASDAQ: EH), has received much attention recently. EHang was the first company in the world to launch an electric self-driving passenger drone. The company aims at making safe, autonomous, and eco-friendly urban air mobility to everyone.
With its latest AAV model “ehang216” the company planned to provide autonomous urban air-taxi service with remote control and real-time connection to its command & control center. While the latter would provide surveillance, dispatch, control, warning, and cluster management of the vehicle, the passengers can just sit and enjoy the journey.
In just a little over a year since it went public in December 2019, EHang’s share price has increased by almost 1000%, from $12.9 to $124.09 on February 12, 2021.
However, on February 16, a short report released by Wolfpack Research caused the company’s stock to plummet by 63% in one day, closing at $46.3.
The report accused EHang to be “an elaborate stock promotion, built on largely fabricated revenues based on sham sales contracts”, which “has perpetuated its story with a collection of lies about its products, manufacturing, revenues, partnerships, and potential regulatory approval of its purported main business, an ‘autonomous’ aerial vehicle ‘AAV’ ridesharing network.”
On February 17 the founder of the company, Huazhi Hu, refuted in an interview most of the points in the short report stating that 70% of the so-called “sham sales contracts” have been already collected and the report “was based on shoddy research and contains numerous errors, unsubstantiated statements, and misinterpretation of information“. EHang declared to consider any necessary and appropriate course of action to protect the interest of the Company and all of its shareholders.
After the response of the company to the short report, EHang’s stock experienced a quick recovery. However, the fears of higher inflation and rising bond market yields prompted a steep sell-off in the stock market between the last week of February and the beginning of March, which also brought EHang’s stock in deep red. On March 24, the SEC has adopted amendments to the Holding Foreign Companies Accountable Act, that threaten to delist firms non complying with U.S. Auditing standards from American exchanges, causing a sharp fall in Chinese tech stocks. On Friday 26th, EHang closed at $34.81.
To sum up, investing in EHang is surely a huge opportunity and risk at the same time.
Credits to: Roberta Zhou