Why EHang Holdings Stock Is Up Today

What happened

Shares of EHang Holdings (NASDAQ: EH) rebounded on Wednesday after a rough trading session on Tuesday. The stock is up 37% as of 11:30 a.m. EST, recovering some of the 62.7% drop it recorded a day prior.

Tuesday's drop was due to an unfavorable report put out by short-seller Wolfpack Research. On Wednesday, we got EHang's rebuttal.

So what

EHang is a Chinese company developing an autonomous air taxi. The stock was having a good year heading into this week, up 450% in just six weeks, but Wolfpack deflated much of that move higher with a research report that accused the company of being "an elaborate stock promotion."

Wolfpack claims EHang's primary customer is not really interested in autonomous air taxis, but rather has signed "sham sales contracts to benefit its investment stock price."

Illustration of an air taxi hovering over a city.

Image source: Getty Images.

After markets closed Tuesday night, EHang issued a response to the allegations. The company in its statement said it "strongly believes that the report contains numerous errors, unsubstantiated statements, and misinterpretation of information."

The company said it will "consider any necessary and appropriate course of action" in response to Wolfpack.

Now what

Investors are understandably relieved to see the company fighting back, but we really don't know much more than we did 24 hours ago. Unless you have boots on the ground in China to inspect EHang's facilities and pour through its financials, it's hard to really know at this point who is correct.

Even after the bounce Wednesday morning, the stock is still down nearly 50% for the week, but is up 200% year to date. And the company is still valued by the market at more than $3 billion.

This is an early stage, high-risk company even if you assume Wolfpack's allegations are false. Given the risks involved and the new uncertainty created by the short report, it feels like a dangerous time to go "bargain hunting," even after EHang's dramatic decline a day prior.

This article represents the opinion of the writer(s), who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

10 stocks we like better than EHang Holdings Limited
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and EHang Holdings Limited wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 20, 2020

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More