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Why EHang Holdings Stock Just Dropped 15% in a Day

By Rich Smith - Feb 18, 2021 at 11:44AM

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Accused of being a sham, EHang promises to prove its short-seller wrong -- but when?

What happened

Investors in flying electric vehicle (aka "air taxi") maker EHang Holdings (EH 7.63%) are having an ... exciting week.

The adventure began Tuesday, when short-seller Wolfpack Research unleashed a broadside at EHang, accusing the company of being "an elaborate stock promotion" that's signing "sham sales contracts to benefit its investment stock price," and thus not a real business at all.

On Wednesday, EHang fired back, accusing Wolfpack of making "numerous errors, unsubstantiated statements, and misinterpretation of information," sparking a rush of investors back into its shares -- but now, the pendulum is swinging back the other way again, and in 11 a.m. EST trading Thursday, EHang stock is down 15%.

Yellow electric air taxis over a cityscape

Image source: Getty Images.

So what

What's the big news today? Following up on its denial of Wolfpack's assertions yesterday, today EHang published updates on what it calls a "major production facility" and announced it will hold an onsite investors day to show off its wares and prove that it is, indeed, a real business.  

Declaring itself "the world's leading autonomous aerial vehicle ("AAV") technology platform company," EHang says it is in the process of retrofitting its 24,000-square-meter production facility and promised to begin producing AAVs in Q2 2021 (i.e., as little as two months from now). The company is promising to build 600 units annually, a number it says "can be further increased to support the growing global market needs." 

Now what

That's the good news. The bad news is that a lot of that language still looks prospective and speculative. EHang's statement said nothing about there being actual demand for 600 air taxis at present. The fact that its facility development is ongoing means it has not been completed yet. And as for the investors day, the company says that won't actually happen until "late June 2021."

The fact that EHang isn't willing, or able, to show investors the goods right now, I fear, will only reinforce short-sellers' suspicion that it doesn't actually have anything to show.

This article represents the opinion of the writer(s), 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.

 

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