GIC's lawsuit against NIO (09866.HK; NYSE: NIO) has been put on hold due to a judge's order to suspend the trial.
On October 15, the news that "NIO was sued by Singapore's sovereign wealth fund" attracted market attention.
The lawsuit came several months after court documents unsealed on August 28th by the U.S. District Court for the Southern District of New York revealed that Singapore's Sovereign Investment Corporation (GIC) accused NIO of misleading investors by inflating revenue and profits. The lawsuit alleges that NIO received over $600 million in battery leasing revenue from NIO Power, a "ostensibly independent" battery asset company, which NIO effectively controlled but failed to disclose its interest in.
The lawsuit alleges that GIC purchased NIO shares between August 11, 2020, and July 11, 2022, and suffered "huge losses" as a result.
GIC manages $936 billion in assets, according to Bloomberg estimates, citing data from consulting firm Global SWF. GIC typically does not disclose the size of its investments in individual companies, and it is unclear how much the fund lost on NIO.
Possibly affected by the news, NIO's stock price plummeted, with Hong Kong stocks closing down 8.99%; as of press time, NIO's US stocks fell 7% in pre-market trading.
A person familiar with the matter told the reporter of The Paper that the lawsuit initiated by GIC is not aimed at NIO’s recent operating conditions, and its roots can be traced back to a short-selling report released by the short-selling agency Grizzly Research in June 2022.
Court documents also show that GIC's lawsuit against NIO cited Grizzly's short-selling report on NIO about three years ago, and the relevant allegations are consistent with those in the report previously released by Grizzly.
NIO has previously issued an announcement to clarify Grizzly's short-selling report.
On June 28, 2022, Grizzlies released a report stating that NIO is likely to use an unincorporated affiliated company "Wuhan Weilan" to exaggerate its revenue and profit margins, and raised a number of questions about NIO's BaaS battery leasing service model and corporate executives.
Subsequently, NIO responded several times that the report was unfounded, and conducted an independent investigation into the main allegations in the Grizzly report, hiring independent third-party professional consultants (including an international law firm and a well-known forensic accounting firm) to assist in the independent investigation.
A few days after the short report was released, several major banks including Morgan Stanley, JP Morgan, and Daiwa Capital Markets issued bullish reports, recommending increasing holdings in NIO and stating that Grizzly's short report may not be accurate.
On August 26, 2022, NIO announced that it had completed an independent investigation into the short-selling report released by Grizzlies on June 28. Based on the results of the investigation, the independent committee concluded that the allegations in the short-selling report were without factual basis.
In addition, according to court documents on October 3, GIC's lawsuit against NIO has been put on hold after the judge ordered a suspension of the trial.
