Good Evening. As investors continued to pay attention to growing indications of a slowdown in US economic growth, US stocks struggled to find direction on Wednesday afternoon.
The Dow increased by 0.27%, the Nasdaq decreased by 0.03%, and the S&P 500 dropped by 0.07%.
SHORT SELLER ALLEGATIONS
A short-seller report this morning sent shares of Nio (NIO) plummeting initially by 8.00%. The company’s response, however, appears to have calmed investors’ concerns, as shares began to recover by midday. Nio stock was still down by 2.24% at closing.
Nio retaliated by vehemently refuting the allegations made in the Grizzly Research report. In essence, Grizzly claimed that Nio is improperly booking revenue from its multi-year subscriptions for its battery swap service. Grizzly acknowledged that it and its affiliates hold short positions in the stock. Due to the subscription, customers can purchase a Nio vehicle for less money upfront and can quickly replace depleted batteries at battery swap stations as opposed to charging them.
The report “contains numerous errors, unsupported speculations, and misleading conclusions and interpretations regarding information relating to the company,” the company said in a statement claiming the claims are unjustified. Nio added that management will review the allegation along with its audit committee to decide whether any appropriate steps should be taken to protect the interests of shareholders.
Business news might influence the stock more if Nio refutes or clarifies the short-sellers’ assertions (any publicity is good publicity).
THIS IS WHY YOU DON'T CHEAT
One of the biggest auditing firms in the world, Ernst and Young (EY), agreed to pay a $100 million SEC fine after acknowledging that hundreds of its accountants had cheated on their ethics exams between 2017 and 2021. Reminder: Since EY and other audit firms are responsible for holding businesses accountable for their financial reporting, ethics and integrity should be a top priority.
But the SEC claims that from 2017-2021, dozens of the company’s employees falsified answers on the ethical component of a test to become a certified public accountant (CPA), and hundreds more allegedly did the same on tests to maintain the certification. Additionally, EY’s internal investigations discovered the fraud, but the company delayed telling the SEC about it for nine months.
Due to EY’s decision to intentionally mislead investigators, the fine is the highest the SEC has ever assessed against an auditing firm. It’s double the fine that KPMG, one of the “Big Four” accounting firms, received after a similar cheating scandal there was discovered in 2019.