NIO Inc (NYSE:NIO) shares fell sharply after Singapore’s sovereign wealth fund, GIC, filed a lawsuit accusing the company of inflating its revenue through improper accounting practices.
The lawsuit argues the Chinese electric vehicle maker manipulated its financial results by recognizing more than $600 million in battery-leasing revenue upfront through Weineng Battery Asset Company, a related party that was reportedly portrayed as an independent entity but allegedly controlled by Nio.
GIC claims the practice misled investors and artificially boosted Nio’s stock price.
The complaint also names Nio’s CEO Li Bin and former CFO Feng Wei as defendants.
GIC, which holds over 54 million Nio shares, claims it suffered losses on purchases made between August 2020 and July 2022 when the stock was allegedly inflated by the disputed accounting.
The case has been stayed pending resolution of an earlier class action lawsuit against Nio involving similar allegations. The company has denied any wrongdoing.
Nio’s shares dropped more than 12% in Hong Kong trading following reports of the lawsuit, marking the company’s steepest one-day decline in months.
The company’s US-listed shares saw a similar decline to pare losses and trade down 3.5% in early trade on Thursday.