CBAT's Nanjing company. Photo by J Capital
Initiation Report: December 18, 2020
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CBAK Energy Technology Inc. (CBAT) represents the barely re-animated corpse of CBAK, a Chinese reverse merger that lost all its manufacturing assets to default in 2014. In 2015-16, CBAT raised $113 mln from investors to build new factories—and, we will show, appears to have simply taken a lot of that cash.
History is repeating itself. CBAT appears to be on the brink of another default. CBAT “is about to go bust; the factory director already ran away,” said a recently departed engineer on the phone with us. “It’s all along been half dead, half alive, mainly relying on the parent company for cash injections to stay alive.” CBAT has all the hallmarks of a Chinese fraud: a 30-year-old interim CFO who took over following the sudden resignation in August last year of the former CFO, an audit firm that was fined by the Hong Kong authorities and banned in the United States, and a rogues gallery of transaction advisors that includes Cowan, Roth, and a one-man broker-dealer called FT Global that is registered to someone named Ke Jian. The auditor, Centurion ZD, was also the auditor of Wins Finance, which was delisted in October after credible accusations of fraud. The dubious relationships don’t end there. CBAT’s auditors were previously involved with a questionable audit of CBAT’s largest new client, Kandi Technologies (KNDI). and FT Global was exclusive placement agent for a KNDI issue in November. The current CEO is little more than a straw man for a founder who is in such dire financial straits that he has been banned in China from taking airplanes. It is telling that CEO Li Yunfei gives a residential address in Hong Kong documents that is close to the old CEO’s company in Shenzhen, thousands of miles from CBAT’s headquarters in Dalian. CBAT claims to be an EV company. Actually, it makes AA-size batteries for small appliances. We contacted the auto companies CBAT claims are big clients, and they denied they do business with CBAT. We think CBAT is taking money from shareholders via the capital construction budget. Our analysis concludes that at least $32 mln in construction assets held on the balance sheet in 2019 is fake. We will show that about $10 mln in 2014 and at least $21 mln since then has been diverted. The company has consistently reported massive construction at its subsidiary in Dalian, from 2015 through the most recent quarter, yet satellite photos and a 2016 government assessment report prove that little has been built there since 2016. We have visited all the CBAT facilities and can confirm that no there is no construction under way now. |
CBAT raised $113 mln from investors to build new factories—and, we will show, appears to have simply taken a lot of that cash. CBAT claims to be an EV company. Actually, it makes AA-size batteries. We have visited all the CBAT facilities and can confirm that no there is no construction under way now. |
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J Capital Research ("J Cap") is a stock-research company. J Cap has analyzed the U.S.-listed company CBAK Energy Technology, Inc. (“CBAT") and is hereby publishing the outcome and the conclusions of our analysis, based on publicly available information. We may be short shares of CBAT and, for this reason, there might be a conflict of interest.
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