Nio tumbles 14% after renowned short-seller Citron Research makes a bearish call citing increased Tesla competition

Nio tumbles 14% after renowned short-seller Citron Research makes a bearish call citing increased Tesla competition
NIO ES8 electric SUVs are seen displayed at the second media day for the Shanghai auto show in ShanghaiReuters
  • Shares of Nio plunged 14% on Friday after a report from Citron Research warned of an impending 48% crash.
  • Still, the 2020 rally in the Chinese electric-vehicle manufacturer Nio now stands at a year-to-date gain of more than 1,100% as of Thursday's close.
  • Nio and other electric-vehicle startups have seen outsized enthusiasm from investors in 2020 as the trend away from internal combustion engines towards electric cars accelerates.
  • Visit Business Insider's homepage for more stories.

2020 has been a strong year for electric-vehicle startups. From high-profile SPAC debuts to soaring stock prices, investors have put a premium on EV stocks as they try to replicate the success of Tesla.

One EV company that has seen an outsized gain this year as it ramps up vehicle production is Nio. The company, which has its eyes set on the premium electric-vehicle space in China, has seen its stock rally by more than 1,100% year-to-date as of Thursday's close.

That rally took a pause on Friday, with Nio dropping as much as 15% in Friday trades after Andrew Left of Citron Research said in a short-seller report that the EV company is poised to crash 48% to $25.
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Left expects increased competition from Tesla to prohibit growth for Nio, as the made in China Model Y could be priced competitively relative to Nio's offerings, according to the note.

"Nio has found itself in uncharted territory that can never be justified by its current standing in the China EV market or its near-term prospects," Left said.

Earlier this month, Nio's market value soared past General Motors' after it reported record monthly deliveries in October. The company said it had cumulatively sold more than 60,000 cars since it debuted its model lineup in 2018.
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Read more: Peter Lynch disciple William Danoff manages over $124 billion and has beaten the market for 30 years. He shares the 10 investment rules that ensured his success.

Now Nio's market capitalization of nearly $70 billion is behind just a few automakers, including Volkswagen, Toyota, and Tesla. But whether it can hold on to and extend its gains in 2020 is likely to hinge on execution as it attempts to grow into its valuation. This is true for many high-profile electric-vehicle companies — and was true for Tesla, which faced years of investor skepticism as it worked to ramp up production to meet soaring demand for its ever-expanding lineup.
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On the flip side, Nikola Corp. is a reminder to investors that fortunes can quickly dwindle on hiccups in the growth narrative of the company. Nikola was the focus of a short-seller report from Hindenburg Research in September that alleged the company and its founder, Trevor Milton, misled and deceived investors.

Read more: Buy these 13 stocks that offer stable and predictable growth without the excessive valuations of big tech, Credit Suisse says

Though it denied the bulk of Hindenburg's claims, Nikola has not fully recovered from the short report, which has put business opportunities such as a partnership deal with General Motors at risk. Nikola and GM have said that talks over that deal are ongoing, with a deadline set for December 3.
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One relatively under-the-radar Chinese EV-maker that investors may shift attention to is Xpeng, which soared 33% on Thursday after it reported strong growth in its third quarter.

Other high-profile electric-vehicle startups that investors are likely to keep an eye on are Fisker, Lordstown Motors, and Rivian, which remains private.

Read more: 38 units, retired at 27, and over $10,000 in monthly passive income: How Rachel Richards leveraged a simple real-estate investment strategy into an income-generating empire
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