Nio stock falls after short-seller Citron targets EV maker

(Reuters) - Shares of electric vehicle maker Nio Inc reversed course to trade lower on Friday after short-seller Citron Research recommended investors to sell the stock, citing pricing pressure posed by bigger rival Tesla Inc in the Chinese market.

FILE PHOTO: A logo of the electric vehicle maker NIO is seen at its store in Beijing, China August 20, 2020. REUTERS/Tingshu Wang

Nio’s ES6 hatchback model faces imminent threat from likely price cuts for Tesla’s Model Y in China, Andrew Left-owned Citron said in an investor note.

Left has long targeted companies that he thinks are over-valued. Friday’s take is a reversal to the firm’s original recommendation two years ago, when it urged investors to buy the stock.

“Anyone buying NIO stock now is not buying a company or its prospects, rather you are buying 3 letters that move on a screen,” Citron said in the note.

Nio did not respond to a request for comment.

Tesla has cut prices in China on several occasions, aiming to gain more market share in the world’s biggest car market.

Currently, China-made Model Y has an estimated price of 488,000 yuan ($73,895) in the country, according to Tesla’s website.

Citron assigned a $25 price target on the Nio stock on Friday, implying a 48% downside to its last closing price.

The stock rose as much as 12.2% earlier in the session after upbeat quarterly results from peer Li Auto. Nio, which has risen more than 12-fold this year, was down nearly 1% at $47.79 in late morning trade.

“It is long buying and not short covering which is driving NIO’s price move,” Ihor Dusaniwsky, managing director of predictive analytics at New York-based S3 Partners, told Reuters.

Short sellers, who have bet that Nio’s stock price will fall, have logged $3.5 billion in mark-to-market losses this year, according to S3 Partners.

Reporting by Ayanti Bera and Munsif Vengattil; Editing by Maju Samuel