Nio shares fell more than 3% in Hong Kong trading after Singapore's sovereign wealth fund, GIC Private Limited, filed a lawsuit against the Chinese electric vehicle maker over alleged irregularities in its revenue recognition practices.

The lawsuit, filed in August, centers on Nio's relationship with its battery asset operator Mirattery, established with partners including CATL, Guotai Junan, and Hubei Science Technology Investment. GIC alleged Nio misled investors by inflating revenue through Mirattery, resulting in investment losses, according to a CnEVPost report, which cited local media outlet Caixin.

Mirattery, created in August 2020, serves as the asset manager for Nio's BaaS battery leasing operations. 

The lawsuit is apparently temporarily stayed in a U.S. court pending the outcome of an earlier class action. Until that case is resolved, Nio is not required to respond. The company's legal department is currently handling the matter.

GIC accumulated about 54.45 million Nio ADS shares between August 2020 and July 2022, a period during which Nio's stock surged more than tenfold in 2020 to an all-time high of $66.99 in January 2021 before declining sharply to under $7 today. The fund's lawsuit is said to have been triggered by a June 2022 short-seller report from Grizzly Research, which accused Nio of using Mirattery to exaggerate revenues and profit margins. It also drew comparisons to Valeant's accounting practices through Philidor.

GIC's allegations echo Grizzly's claims, asserting that Nio improperly recognized full battery sales revenue upfront when selling batteries to Mirattery under its Battery-as-a-Service (BaaS) model. The fund argues that using installment-based revenue recognition, which it considers compliant, would have resulted in materially lower performance figures and prevented Nio's 2021 valuation spike.

Nio conducted an internal review following the Grizzly report and said the allegations were unfounded, a view that several Wall Street analysts also supported at the time. Nonetheless, Grizzly's report prompted two class action lawsuits in 2022, later consolidated in the Southern District of New York. Nio filed a motion to dismiss the cases in July 2023, and the court has not yet ruled.

GIC's decision to file suit three years later may reportedly reflect the material size of its losses, adding that as a sovereign fund, GIC has an obligation to show it acted diligently to protect its fiduciary assets.

On Stocktwits, retail sentiment for Nio was 'bearish' amid 'low' message volume.

Some users expected further weakness in Nio's shares, saying the stock could extend its decline in the next session following the lawsuit news.

Nio's U.S.-listed stock has risen 56% so far in 2025.

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