Uxin Addresses Short-seller Claims; Stock Jumps 4%
The stock of Uxin Ltd. (Nasdaq: UXIN) closed 4 percent higher Monday after the company posted an extensive response to last week's allegations by a short seller.
The Beijing-based used car sales platform was hit a week ago by a report from J Capital Research, which alleged it overstated its auto sales, inflated the prices of its cars, did not disclose its full debt, took more loans than needed, counted third-party business transactions as its own, and doubled its inventory on paper. It also claimed that the founder, chairman, and chief executive of Uxin, Kun Dai, had taken out cash from the company.
On Monday, Uxin once again called the claims made by analyst Anne Stevenson-Yang "misleading," "erroneous," and "malicious," reiterating the denial it posted last week as its stock briefly lost half its value the day the report was out.
The company also addressed the claims J Capital made in its report, sending its stock to recover further, closing at $3.49 per American depositary share.
Uxin said the short seller lacked basic knowledge of China's administrative divisions. It said the prices on its cars will vary by region according to the distance it would have to travel to a buyer and include costs such as title transfer. Uxin also said it inspects all its vehicles and enables other car dealers to sell the same cars, instead of taking used car inventory.
The company said it has disclosed all the debt in its U.S. filings as required by the U.S. regulations.
In regard to loans, Uxin said that it provides more financing services to its users than just for autos, which increases its total loans taken from partnering banks.
As to circular transactions from third-party companies, Uxin said it does not have access to the software which counts its deals and it does not pay any dealers to route transactions through its system.
To the allegation of "siphoning cash," Uxin responded that Dai and his entities borrowed money from the company, with principal and interest totaling $114 million, which was disclosed in the prospectus. Further, Dai has repaid the amount by surrendering 38 million in Uxin shares, the company stated. Another $180 million that J Capital alleged Dai "netted" was transferred to Huarong SPV in the form of stock in exchange for a loan which the company provided to Uxin prior to its IPO.
Uxin said in its statement, "Uxin has long been upholding its principle that consumers and integrity come first. Over the past eight years, Uxin has upgraded its inspection products 8 times, expanded the inspection check points from 174 to 315, extended its quality-related return policy from 14 days to 30 days, and expanded warranty coverage from 10 to 15 systems. The Report overlooks the appreciation shown by consumers, media, industry players and the regulators for Uxin's services, and jumps to conclusions simply based on some groundless articles. It not only defames Uxin, but also misleads the public and the capital markets."
Uxin became publicly traded in June, raising $400 million for 25 million ADSs on the Nasdaq.