What happened

Shares of Chinese electric vehicle (EV) maker Nio (NIO 0.38%) have been dropping this week, even starting today's session down another 3%. But they have bounced back and are recouping some of the 7% loss that occurred over the prior two sessions. As of 12:08 p.m. ET, Nio stock was up 2.9% today. 

So what

Two things that have been weighing on Nio shares this week have been new COVID-19 restrictions in several places in China and the company's update on its response to a recent short-seller report. The report from Grizzly Research suggests Nio has been reporting sales related to its battery-as-a-service (BaaS) option that should instead be spread out over the years of the subscription. 

Nio EV in battery swap station.

Image source: Nio.

Nio offers the subscription to allow customers to effectively rent the battery as a subscription service and use its battery swap stations to replace drained batteries with fully charged ones in a matter of minutes. The service allows EV buyers to spend less up front on the vehicles. Nio said last week that it now has 1,000 swap stations, and its customers accomplish more than 30,000 battery exchanges every day. 

Now what

Nio's board of directors said this week that it has established an independent committee to investigate the short-seller allegations about improperly booking the sales of those batteries. The company said management suggested forming the committee, but the stock has been under pressure ever since. 

In addition to that issue, China implemented new COVID-19 restrictions over the weekend, including shutting down the casinos in Macao for one week. Nio and other manufacturers in China were impacted severely in the second quarter from previous lockdowns. But it and others recovered strongly in June, and there have been no new lockdowns reported since the weekend.

That likely helps explain the bounce in Nio shares today. The stock was hit by the short-seller allegations, and investors may be betting that there will be a recovery if management's apparent confidence in its business is supported by an independent committee.