What happened

The stock of Chinese electric-vehicle (EV) maker Kandi Technologies (NASDAQ:KNDI) is continuing a drop that began yesterday, with shares down 8% as of 11:35 a.m. EST. 

Today's dip is on top of the 28% drop the shares experienced yesterday from Friday's closing price. 

So what

The big news yesterday was a scathing report on Kandi from short-seller firm Hindenburg Research. Investors may be familiar with that firm as the one that put electric-truck maker Nikola (NASDAQ:NKLA) in the news and caused founder Trevor Milton to leave the company. 

blue Kandi model K23

Kandi model K23. Image source: Kandi Technologies.

Shares of Kandi were on a roll in November, and management tried to take advantage of that to raise money in two separate stock offerings. The company reached a market capitalization of over $900 million on Nov. 19, a level it hasn't seen since 2014. But a retreat in the overall EV sector, along with the Hindenburg report, has driven the valuation back down by 30% since November highs. 

Now what 

Hindenburg claimed some of the company's reported sales are being faked. It said that more than half of sales over the past year are actually to an entity tied to the company and not to an actual customer. 

Today Kandi made an initial response to the allegations, saying it believes the report "contains numerous errors, misstatements of historical facts, inaccurate conclusions, and superfluous opinions." Kandi management said that it plans to release detailed explanations and highlight "key inaccuracies" in the near future. 

Investors can study the report and decide for themselves if Hindenburg's short position in the stock may have influenced the allegations. Some investors aren't waiting for the upcoming detailed response from the company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.