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Discussion Starter · #1 ·
Hindenburg Research, the company that started the investigations into Nikola, has turned their focus towards Kandi.

They claim that Kandi used fake sales numbers to receive $160 Million From U.S. Investors among other accusations.


  • Today we reveal what we believe to be a brazen scheme by China-based, NASDAQ-listed Kandi Technologies Group to falsify revenue using fake sales to undisclosed affiliates.
  • Our investigation included extensive on-the-ground inspection at Kandi’s factories and customer locations in China, interviews with over a dozen former employees and business partners, and review of numerous litigation documents and international public records.
  • We unmasked Kandi’s “unnamed” top customers and found that almost 64% of Kandi’s last twelve months (LTM) sales have been to undisclosed related parties.
  • The company’s largest customer, representing ~55% of last twelve months (LTM) sales, shares a phone number with a Kandi subsidiary, and shared an executive with Kandi.
  • We visited the “customer”. It is based in a tiny building right next to Kandi’s factory with a sign indicating that it’s a Kandi company. The same building housed another entity used by Kandi as part of a separate fake sales scheme to collect illegitimate subsidies from the Chinese government, for which it was fined and sanctioned.
  • Kandi’s second largest customer, representing ~9% of LTM sales, was once wholly owned by the company. Its website still integrates the Kandi logo with the customer name. Export records show that 91% of the U.S. exports by the “customer” went to undisclosed related party entities based out of Kandi’s U.S. headquarters and warehouses.
  • To support this, we have photographic evidence of one such Kandi “customer’s” inventory sitting in Kandi’s own warehouse.
  • Kandi’s financials corroborate our concerns. The company has consistently booked revenue it cannot collect, a classic hallmark of fake revenue. Its Days Sales Outstanding (DSO) a common measure of revenue collection, was 278 days in the previous quarter, about 5.6x worse than its closest auto peer.
  • Kandi’s top financial ranks have been a revolving door; another key sign of accounting irregularities. The company has had 3 auditors in the past 5 years, and 4 Chief Financial Officers in the past 4 years.
  • Kandi’s current auditor, Marcum, was just handed a 3-year ban from auditing Chinese companies by the Public Company Accounting Oversight Board (PCAOB). Rather than firing the auditor, Kandi just reported its intention to renew the engagement.
  • Kandi’s latest issues are part of a long-running pattern, rather than an isolated incident. The architects of Kandi’s original go-public transaction were charged with fraud by the SEC in 2014 for, among other things, engaging in a scheme with Kandi’s (still) Chairman/CEO to artificially inflate its stock price.
  • In 2016, Kandi’s long-serving prior auditor was ejected from the industry by the PCAOB specifically for failure to catch obvious signs of fraud at Kandi, including misappropriation by company management and undisclosed related party transactions.
  • Kandi’s latest pitch to investors is focused on an imminent U.S. launch. We show that Kandi has been “launching” in the U.S. for 12 years. Its first U.S. vehicles were imported illegally and seized by customs. A former distribution partner said every single car that eventually made it into the country broke.
  • Kandi has a reputation in China for poor quality vehicles and failing to honor service warranties. The company has reported no domestic EV sales for years outside of its minority stake in a joint venture. We expect its U.S. efforts will continue to sputter.
  • We also review Kandi’s partnership with a Chinese rideshare company, which it has repeatedly claimed could lead to up to 300,000 EV sales. We show that the rideshare partner’s app is mostly vaporware; it has almost no users and isn’t even ranked among China’s top 50 rideshare apps.
  • Lastly, we address the company’s much-touted battery swap program, which is preliminary and hopelessly behind peers, including Kandi’s own partner Geely. Without a meaningful number of cars on the road Kandi’s battery swap efforts simply don’t make sense.
  • Kandi raised $160 million from U.S. investors this month alone. All told, we think Kandi has engaged in a major fake revenue scheme, hyping its story to U.S. investors, in order to take advantage of regulatory gaps enabling China-based companies to siphon cash from U.S. capital markets with impunity.
 

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That report sounds a bit sketchy to me. I know its the famous org that brought down Nikola, but with this it seems like they are drawing lots of unfounded conclusions with basically what amounts to import documentation. The fact that Kandi and associated companies have "purchased" imports from the manufacturing base and its listed as ownership with a different brand under the same company umbrella isn't surprising. I've worked in electronics imports in the past, you can have many different companies names listed on importation paperwork, it doesn't mean any scam is going on. I think they're either trying to mislead, or they are misunderstanding the information in front of them.

What is surprising are the outlandish claims Hindenburg is claiming. For starters, any money raised through stock is voluntary. They didn't "steal" any money, they raised it through sales of stock that people voluntarily and willingly purchased. That portion of their piece is pure click-bait. Looks as if the stock has dropped recently, so any gains have been thoroughly lost. Again, voluntarily, its how the stock market works. There is no force here.

Sounds to me that Hindenburg might financially gain by trying to short a company. Its all a bunch of nonsense if that's the real issue.

Its a dangerous game, because traditional automakers in North America have dropped the ball with trying to deliver affordable EV's. We need options, and Kandi is starting to offer some actually affordable options to people.
 

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Discussion Starter · #3 ·
Some of their claims are a bit out there I won't deny that. But I thought the same thing when I read their piece on Nikola. I hope they're proven wrong because we need more affordable EVs on the market.
 

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If I am reading correctly, this firm has a vested interest. They actively short companies, so they have a vested interest in seeing companies fail. That type of incentive is not in line with truth, but if truth is on their side they get incredible lucky. What is the truth? Well, I'm not convinced they've made a case here, so we will see in time what happens.
 

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Hindenburg need a bit of its own medicine from the Reddit Army the same way that other vulture capitalists were poked in the eye with GameStop and AMC. lol
 

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If I am reading correctly, this firm has a vested interest. They actively short companies, so they have a vested interest in seeing companies fail. That type of incentive is not in line with truth, but if truth is on their side they get incredible lucky. What is the truth? Well, I'm not convinced they've made a case here, so we will see in time what happens.
Too bad Hindenbuirg wasn't amongst those hedge funds in the GameStop & AMC carnage that got poked in the eye. What Hindenburg did should be illegal. IMHO It's immoral and a very big conflict of interest, aside from it being market manipulation, to put out an hit piece right before shorting the heck out of a company that is trying to make ends meet. Hindenburg and the other Hedge Funds are like vultures, except real vultures have the decency to feast on their prey after they are down. In Hindenburg's case they kick their prey down to hasten the kill and laugh all the way to the bank.
 

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I'm surprised people haven't caught onto what Hindenberg is, they short companies and release bad press to ensure they take a windfall profit, this kind of puts a huge financial incentive into having a bias on it. They aren't "reporting" they are profiteering.
 
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