Shareholders of EHang Holdings (EH -0.32%) have gone on a wild ride so far in 2021, with the stock up as much as 450% earlier this year. The company has attracted its fair share of fans, and critics, along the way. But a disclosure by the Chinese company, which plans to make autonomous flying taxis, that it would be delayed in filing its year-end financials has the bears in charge on Monday, with the shares off 15%.
EHang is developing a range of products, but most of the attention is on its EH216 flagship autonomous aerial vehicle. The company hopes to see fleets of its flying taxis shuttling passengers in the years to come.
The stock was a big winner in the early days of 2021, but lost a significant portion of those gains in late February after short-seller Wolfpack Research called EHang "an elaborate stock promotion." Wolfpack questioned the validity of some of EHang's sales contracts, saying the buyers appear "to be more interested in helping inflate the value of its investment" than actually acquiring flying taxis.
EHang has fired back, and the stock price has stabilized somewhat, but we still don't know exactly what is going on.
In such a scenario, any sort of bad news can put pressure on the stock price. EHang delivered just that late Friday, in a Securities and Exchange Commission filing that says it needs additional time to complete its year-end filings because it "experienced a delay in preparing its annual report ... and audited financial statements."
There is no way to argue that delaying the annual filing is a good thing, but it is hard to say with any certainty that it is a notably bad thing for investors. It is possible this delay is the first hint that auditors have uncovered proof that some or all of what Wolfpack alleges is correct. It is also possible it is just a simple timing or clerical error that will soon be resolved.
What we do know is that EHang is priced at a lofty 56 times sales and 36 times book value despite being an early stage, speculative investment. With stocks priced for perfection, any hint of trouble tends to cause an oversize reaction. That's what we are seeing from EHang shares today.