Microvast (MVST): Low China Production and a Grant Loss That Was Probably Hidden:

Another China Hustle

Initiation Report: November 21, 2023, update November 27, 2023
J Capital Research ("J Cap") is a stock-research and media company. J Cap has analyzed the U.S.-listed company Microvast Holdings. (“MVST”) and is hereby publishing the outcome and the conclusions of our analysis, based on publicly available information. We may be short shares of MVST, and, for this reason, there might be a conflict of interest.
  • On November 22, MVST’s chairman posted videos on his LinkedIn account showing significant activity in the Huzhou factory, in apparent contradiction to our report. We sent people to the plant to verify and found that the company does, in fact, have many employees, but, based on our research, nowhere near the 2,500 the chairman claimed. We are issuing this report to fairly and correctly address the company’s recent public statements.
  • We think the majority of MVST’s sales may be fake. MVST’s Chinese customers account for 57% of revenue in 2023, but the China factory is quiet and we believe produces little. MVST China has disappeared from Chinese procurement lists, and local competitors say the company is not making discernible sales. We are skeptical of the revenue shown in local financial statements.​​
  • We suspect MVST knew a DOE $200 mln grant for a U.S. factory addition had been rescinded but failed to inform investors until the information hit Reuters months later, and MVST had no choice but to disclose.
  • We question the company’s reported backlog, currently $678.7 mln. Backlog growth is much higher than revenue growth. There was a $189 mln jump in Q2 2023, but the only visible addition came from a December agreement with REE Automotive - whose entire revenue is less than $1 mln. Regardless, based on the company’s track record, this could end up being a backlog of future losses.
  • MVST is a Chinese EV battery business that has failed. MVST, whose operations were almost all in China before the merger with Tuscan Holdings, nearly went bankrupt in 2019 but was saved by the SPAC. Tuscan had been seeking cannabis targets but settled on batteries.
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PictureMVST HQ in Huzhou China. Photo by J Capital.
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