Chinese eVTOL aircraft developer EHang has stepped up efforts to reassure investors who may have been discouraged by the contentious Wolfpack Research report, published earlier this week, alleging that the company has misrepresented multiple aspects of its business. A new statement issued this morning seeks to rebut accusations that EHang connived with a Chinese company called Shanghai Kunxiang Intelligent Technology to misrepresent early orders for its EH216 Autonomous Aerial Vehicles.
This charge was just part of a litany of accusations made by U.S.-based Wolfpack, which described EHang as “a stock promotion destined to crash and burn.” In a succession of rebuttals this week, EHang has dismissed its critic as a self-serving “short-seller.” Early today, Wolfpack Research indicated that it intends to respond to EHang’s rebuttals.
EHang’s stock on New York’s Nasdaq exchange has fluctuated after crashing 63 percent to $46.31 in the immediate aftermath of the report published late on Tuesday. By the close of trading on Wednesday, the price was back up to $77.73 but it dropped another 21 percent to close at $61.19 on Thursday. That’s less than half of the $129.80 high achieved since the company’s December 2019 initial public offering (IPO).
In a bid to restore the reputational damage inflicted by Wolfpack’s accusations, EHang will hold an “investors day” event in late June at the factory in Yunfu where it is building the EH216. Wolfpack, a self-proclaimed “activist research firm” that largely focused on taking short positions on equities, alleged that EHang does not have the manufacturing capacity or capability to support the scale of production to which it aspires.
In an EHang statement issued on February 18, the company said that the factory will span 24,000 square meters (258,000 square feet) when it is complete and that it will be able to support output of 600 aircraft per year. Currently, the facility near the city of Guangzhou, is 8,750 square meters (94,000 square feet) in size.
According to EHang, production will begin in the second quarter of this year even though the two-seat EH216 has yet to complete type certification by the Civil Aviation Administration of China (CAAC). The company said the facility incorporates multiple assembly lines, a computer numerical control processing center, a paint shop, and a unit for processing carbon fiber composite materials.
EHang alleges that an apparent investigator working for Wolfpack trespassed in its facilities while disguised as a delivery worker and released video footage of this incident. It says that photos published by Wolfpack intentionally gave a misleading impression of its facilities.
In the February 19 statement, EHang denies claims by Wolfpack that Kunxiang had been a shareholder prior to the IPO, and fervently denies that that company placed an order for EH216s at greatly reduced prices in an effort to exaggerate market response to the product. EHang published a contract showing the unit price for each aircraft to be RMB1.5 million, which is just under $232,000, which it insisted is not “substantially different” from prices offered to other Chinese customers.
What EHang has not yet addressed are the terms under which it claims to have delivered more than 100 examples of the EH216 to other customers, including several outside China. As of the end of the third quarter of 2020, EHang’s financial reports indicated that it had delivered a total of 112 aircraft.
It is unclear why customers would take delivery of so many examples of an aircraft that is not yet certified and cleared for commercial operations. Furthermore, it is not clear what these customers, which EHang has sometimes characterized as dealerships, might have paid for the aircraft delivered. It has implied that aircraft have been delivered early, to be available for public demonstrations and flight trials in countries such as Austria, Norway, and Canada, where it says authorities have issued temporary permits to operate.
EHang has indicated that it expects to complete type certification for the EH216 in China by the end of 2021. It will still need to complete challenging approval processes in other key markets, such as Europe and North America, where regulators are not expected to issue type certificates for other eVTOL aircraft before 2023.
When pressed by FutureFlight and other news organizations for details on the status of type certification work, EHang has generally responded with upbeat but vague reports about how closely it is working with the Civil Aviation Administration of China (CAAC). The agency appears to have granted EHang significant leeway in being able to conduct public flight trials during the certification process, including what are claimed to be flights with passengers who are not employees. The company has also reported commercial partnerships involving services such as sightseeing and logistics.
On February 17, EHang’s communications team published an interview with company founder Huazhi Hu. In this, he briefly addressed an array of Wolfpack’s criticisms, including questions over EHang’s ability to safely and cost-effectively support autonomous flight; the caliber of the technology it is using for the EH216; its ability to support the level of investment required to bring eVTOL aircraft into viable commercial service; and an allegation that “most” of EHang’s assets may have been frozen by a Chinese court in legal proceedings against an entity called EH Guangzhou.
The ongoing dispute between EHang and Wolfpack appears not to have impacted trading in other eVTOL-connected equity this week.
At the close of trading on February 18, stock in Atlas Crest Investment Corp.—the special purpose acquisition company (SPAC) that last week announced a merger with Archer Aviation—was in the ascendant at $17.14 (compared with a previous high of $18.60).
This week also saw the flotation of another SPAC called New Vista Acquisition Corp., which was formed by former Boeing CEO Dennis Muilenburg and other private investors with the intent of making acquisitions in the advanced air mobility sector. At the close of trading on February 18, its stock had risen to $11.58 from its target launch price of $10.
[This article was re-edited on February 24 to correct a currency conversion rate used for the reported price of EHang's EH216 vehicle.]