American depositary shares of electric-car maker Nio Inc. rose more than 10% Monday after legendary short seller Citron Research called it “much more than just a Chinese electric car story” and “the worst way to bet against China.”
Nio ADRs NIO, +7.51% were poised for their best day since Oct. 15 and their biggest one-day gain since Nov. 1. The stock made its debut on the New York Stock Exchange in September.
Andrew Left of Citron Research started off by saying it had learned “not to be short a disrupter with a cultlike following and a large outstanding short interest alongside a patient investor base” when it spent years battling Tesla Inc. TSLA, -0.18%
Citron turned long on Tesla in October after years of betting against the stock and saying in March Tesla shares would be down to $100 by the end of the year.
Lesson learned, Citron’s Left went on to say that Nio, just like Tesla, is not a simple Chinese electric car story, and its “visionary management is revolutionizing the high-end auto industry in China” at a time the Chinese government has made electric vehicles one of the country’s top priorities.
Read more: China’s Tesla IPO: 5 things to know about Nio
Nio “is not just a car company, it is a lifestyle and a brand that is ready to disrupt and the implications for the stock price cannot be ignored,” Left said in a note. Even Tesla would be “envious” of the business moat the company is creating.
Dealerships are called Nio Houses and are not just places to buy cars, but rather “‘trendy-club’ style spaces where NIO customers and prospects socialize and can utilize a variety of features dedicated to members,” Left said.
“The brand recognition and customer loyalty that has resulted is beyond anything Tesla has been able to create in the United States in its early days,” the short seller said.
Nio also has the advantage of being a second mover and learning from “the growing pains of other EV car makers,” Left said.
The report was so gushing in praise that Left had an answer for those wondering if it was a “Nio commercial.”
“NOOOOOO….But we just do not understand how anyone can be short this stock. Haven’t we made this mistake in the past???”
Nio is expected to unveil its crossover ES6 next month, with production slated for the first half of 2019. Left urged fellow short sellers to not “be short into a major positive catalyst,” as learned from their dealings with Tesla.
“With Nio’s management team, superior product, exceptional brand loyalty, and extremely high short interest, we know how this story ends for short sellers,” Left said.
Nio ADRs have gained 56% since their initial public offering and 12% so far this quarter, contrasting with losses of 8% for the S&P 500 index SPX, -1.51% in the quarter.
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