Workflow
Short Seller Says Hesai Group Stock Is A 'Chinese Scam'
HSAIHesai(HSAI) Benzinga·2025-03-18 16:10

Core Viewpoint - Hesai Group is facing significant scrutiny and pressure on its stock following allegations from short seller Blue Orca Capital, which claims the company is misleading investors regarding its ties to the Chinese military and its financial disclosures [1][2]. Financial Concerns - Blue Orca Capital has accused Hesai of providing suspect financials and lying about its involvement with the Chinese military, deeming the company untrustworthy and uninvestable [2]. - The short seller highlighted that Hesai's profitability, reported late last year, may have been artificially inflated by a 20millionbreak−upfeefromitslargestcustomer,whichwasnotdisclosedtoinvestors[6].−Concernswereraisedaboutinconsistentpurchasingvolumesrelativetoreportedsalesandunexplainedmarginexpansion,alongsidethewithdrawalofthecompany′sIPOinChina[8].MilitaryAllegations−AllegationshavebeenmadethatHesaihasmisledbothinvestorsandU.S.authoritiesregardingtheuseofitslidartechnologyformilitaryapplications,withevidencepresentedshowingamilitaryvehicleequippedwithHesai′slidarsystem[3].−TheDepartmentofDefensedesignatedHesaiasa"Chinesemilitarycompany"inJanuary2024,andthecompanyiscurrentlysuingtoberemovedfromthislist,withexpectationsthatitmaylosethecase[4].RevenueImpact−BlueOrcaestimatesthatHesaicouldloseacustomersegmentthathistoricallyaccountedfor4020 million break-up fee from its largest customer, which was not disclosed to investors [6]. - Concerns were raised about inconsistent purchasing volumes relative to reported sales and unexplained margin expansion, alongside the withdrawal of the company's IPO in China [8]. Military Allegations - Allegations have been made that Hesai has misled both investors and U.S. authorities regarding the use of its lidar technology for military applications, with evidence presented showing a military vehicle equipped with Hesai's lidar system [3]. - The Department of Defense designated Hesai as a "Chinese military company" in January 2024, and the company is currently suing to be removed from this list, with expectations that it may lose the case [4]. Revenue Impact - Blue Orca estimates that Hesai could lose a customer segment that historically accounted for 40% of its revenues and approximately 57% of its gross profit due to its military designation [5]. - Following a recent surge in stock price due to a reported multi-year deal with Mercedes-Benz, skepticism remains regarding the exclusivity of this deal, as Mercedes has not publicly confirmed it [7]. Stock Performance - Hesai Group's stock has seen a nearly 300% increase over the past year, but it was down 8.5% to 20.39 at the time of the report's publication [9].