Ideanomics fires back at short sellers’ accusations of misleading investors
08 July 2020 New York
Image: frankie's/Shutterstock.com
Ideanomics, an international fintech firm for the electronic vehicles sector, has refuted negative reports published by short sellers J Capital and Hindenburg, which it says contain “inaccuracies and misstatements” on its financial health.
Ideanomics is headquartered in New York and has offices in Beijing, Guangzhou and Qingdao, China. Much of the short sellers’ claims focus on apparent inconsistencies in its Chinese operations and overall financial stability.
Claims that the firm is fraudulently exaggerating the scale of its Chinese operations has also recently led some of its investors to employ shareholder rights law firm Robbins to file a class action complaint against Ideanomics for alleged violations of the US Securities Exchange Act of 1934 between 20 March and 25 June.
To counter the hedge funds’ accusations, Ideanomics has published a series of retorts in an effort to restore investor confidence on 29 June.
Firstly, to J Capital's suggestion that Ideanomics does not have sufficient cash to fund operations for more than three months, Ideanomics says its recent series of filings of form 424B2 with the US Securities and Exchange Commission states clearly that it has raised capital recently.
Secondly, Hindenburg Research alleged that Ideanomics claims to own and operate a large-scale facility in Qingdao, China, for its Mobile Energy Global (MEG) division sales and that their investigators have been on-site and claim MEG does not have a presence there.
To this, Ideanomics says it has never claimed or disclosed ownership of the site, explaining that it holds a 15-year rent-free agreement which was signed in November 2019. The firm adds that it has provided images to show its participation at the site but the validity of these is now also being disputed.
Thirdly, Hindenburg Research disseminated social media content regarding their conversation with MEG partner's sales staff with auto dealers at this site, but Ideanomics now says it has statements from these staff members that refute Hindenburg's claims.
On 26 June, Among a flurry of social media posts outlining its suspicions of Ideanomics, Hindenburg Research tweeted: “We continue to believe that Ideanomics is engaged in flagrant securities fraud and that its stock will end up in pennies."
Fourth, J Capital says it contacted the local Qingdao city investment group for the Chengyang business district - Qingdao Chengyang Xinyang Investment - and that they have no knowledge of Ideanomics or its MEG division.
To counter this, Ideanomics is providing government-issued registration of the venture, which it says is a matter of public record in China.
Furthermore, the city investment entity has released details of its interest in the ventures, including a recent RMB 50 Million (USD 71.3 million) investment received by the Ideanomics in January, as part of a potential series of investments, and recent media coverage in the People's Republic of China corroborates this.
J Capital further alleges that it has inquired with recent deals signed by Ideanomics MEG division, and its subsidiaries and that these companies deny having a business relationship with it.
Ideanomics says it has since contacted each of the partners and they have provided statements confirming their business relationships with it.
These partners include Tianjin Zhongcheng order for 42 units of Toyota Land Cruiser, Jiudao Group for 400 units of Aoxin X30L EV, Beijing Silk Road Rainbow, and Qinou Group order of 200 units of Dong Feng Liuzhou S50EV for the City of Neijiang, Sichuan.
Alf Poor, CEO of Ideanomics states: "After consultation with our legal counsel, we believe these communications, marketed as research are illegal or have been banned in many countries, but continue to operate in the grey areas of financial regulatory law in the US."
The company is urging investors to focus on its press releases, earnings and SEC filings, along with detailed documentary proof to support Ideanomics response to the allegations which can be found on its website.
After these allegations were made, Ideanomics' share price fell over 53 percent over two days to close at $1.46 per share on 26 June.
The numbers
Data provided by Ortex Analytics shows that the short interest in Ideanomics has risen steadily since the end of February. The share price, on the other hand, has fallen consistently, except for a bump up at the end of March.
Then at the beginning of June, with about 10 percent of freefloat shares on loan, the share price went up and kept rising very rapidly from 38 cents on the 4 June to a peak at $3.29 on the 22 June, a price increase of 765 percent.
Meanwhile, shares on loan kept on going up and peaked at over 20 percent of the freefloat as of 29 June.
Co-founder and CTO at Ortex, Peter Hillerberg tells SLT: “Whoever was shorting this, was betting that the price would go back down, and from the peak of $3.29, the price has fallen significantly and is currently at $1.29”.
Ideanomics is headquartered in New York and has offices in Beijing, Guangzhou and Qingdao, China. Much of the short sellers’ claims focus on apparent inconsistencies in its Chinese operations and overall financial stability.
Claims that the firm is fraudulently exaggerating the scale of its Chinese operations has also recently led some of its investors to employ shareholder rights law firm Robbins to file a class action complaint against Ideanomics for alleged violations of the US Securities Exchange Act of 1934 between 20 March and 25 June.
To counter the hedge funds’ accusations, Ideanomics has published a series of retorts in an effort to restore investor confidence on 29 June.
Firstly, to J Capital's suggestion that Ideanomics does not have sufficient cash to fund operations for more than three months, Ideanomics says its recent series of filings of form 424B2 with the US Securities and Exchange Commission states clearly that it has raised capital recently.
Secondly, Hindenburg Research alleged that Ideanomics claims to own and operate a large-scale facility in Qingdao, China, for its Mobile Energy Global (MEG) division sales and that their investigators have been on-site and claim MEG does not have a presence there.
To this, Ideanomics says it has never claimed or disclosed ownership of the site, explaining that it holds a 15-year rent-free agreement which was signed in November 2019. The firm adds that it has provided images to show its participation at the site but the validity of these is now also being disputed.
Thirdly, Hindenburg Research disseminated social media content regarding their conversation with MEG partner's sales staff with auto dealers at this site, but Ideanomics now says it has statements from these staff members that refute Hindenburg's claims.
On 26 June, Among a flurry of social media posts outlining its suspicions of Ideanomics, Hindenburg Research tweeted: “We continue to believe that Ideanomics is engaged in flagrant securities fraud and that its stock will end up in pennies."
Fourth, J Capital says it contacted the local Qingdao city investment group for the Chengyang business district - Qingdao Chengyang Xinyang Investment - and that they have no knowledge of Ideanomics or its MEG division.
To counter this, Ideanomics is providing government-issued registration of the venture, which it says is a matter of public record in China.
Furthermore, the city investment entity has released details of its interest in the ventures, including a recent RMB 50 Million (USD 71.3 million) investment received by the Ideanomics in January, as part of a potential series of investments, and recent media coverage in the People's Republic of China corroborates this.
J Capital further alleges that it has inquired with recent deals signed by Ideanomics MEG division, and its subsidiaries and that these companies deny having a business relationship with it.
Ideanomics says it has since contacted each of the partners and they have provided statements confirming their business relationships with it.
These partners include Tianjin Zhongcheng order for 42 units of Toyota Land Cruiser, Jiudao Group for 400 units of Aoxin X30L EV, Beijing Silk Road Rainbow, and Qinou Group order of 200 units of Dong Feng Liuzhou S50EV for the City of Neijiang, Sichuan.
Alf Poor, CEO of Ideanomics states: "After consultation with our legal counsel, we believe these communications, marketed as research are illegal or have been banned in many countries, but continue to operate in the grey areas of financial regulatory law in the US."
The company is urging investors to focus on its press releases, earnings and SEC filings, along with detailed documentary proof to support Ideanomics response to the allegations which can be found on its website.
After these allegations were made, Ideanomics' share price fell over 53 percent over two days to close at $1.46 per share on 26 June.
The numbers
Data provided by Ortex Analytics shows that the short interest in Ideanomics has risen steadily since the end of February. The share price, on the other hand, has fallen consistently, except for a bump up at the end of March.
Then at the beginning of June, with about 10 percent of freefloat shares on loan, the share price went up and kept rising very rapidly from 38 cents on the 4 June to a peak at $3.29 on the 22 June, a price increase of 765 percent.
Meanwhile, shares on loan kept on going up and peaked at over 20 percent of the freefloat as of 29 June.
Co-founder and CTO at Ortex, Peter Hillerberg tells SLT: “Whoever was shorting this, was betting that the price would go back down, and from the peak of $3.29, the price has fallen significantly and is currently at $1.29”.
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