(Yicai Global) May 28 -- Tianneng Power International has reacted strongly to a short seller’s report that claims the leading Chinese battery maker is “a blatant fraud and dying business.” The firm flatly denies the allegations and is taking its accuser to court.

Tianneng Power is accused of “fabricating at least CNY2 billion (USD280 million) in profits from 2017 to 2019, an overstatement of more than 100 percent,” according to the report released by the activist investor group Cloudy Thunder Research.

Tianneng Power will make further clarification about the unreal contents in Cloudy Thunder's report later, the Hong Kong-based company said today.

“The report is totally irresponsible and purely speculative,” Bloomberg News quoted company spokesperson as saying yesterday. “If we are not a company with normal operations, we won’t be able to keep paying out dividends in the capital market.”

Shares of Tianneng Power [HKG:0819] plunged 7.3 percent yesterday to HKD8.20 (USD1.06) before trading was halted at 11 a.m. That ended a very good run with the stock price gaining almost 50 percent since the beginning of the year.

“We believe the company is a fraud and that its stock value is close to zero,” Cloudy Thunder said in its first ever report. “As of Dec. 31, 2019, Tianneng Power has understated approximately between CNY600 million (USD84 million) and CNY700 million in accrued rebates liabilities to distributors, representing an understatement of approximately 60 percent.”

“In our opinion, Tianneng’s rebate system share similar features of a Ponzi scheme,” the report said. The group of unidentified activists known as Cloudy Thunder aims to “promote honesty in China’s financial markets,” according to its website.

The news comes as Tianneng Power was preparing to spin off its core battery business and list it on the Shanghai Stock Exchange’s Nasdaq-style Star Market to raise a possible CNY3.6 billion (USD503 million). As the company’s main breadwinner, the battery business accounted for 83 percent of revenue in 2018, the move has raised eyebrows among analysts.

Tianneng Power, which makes batteries for use in electric vehicles and new energy storage systems, had net profit of CNY1.7 billion (USD238 million) last year, a 40 percent jump from the year before. Revenue was CNY40.6 billion (USD5.7 billion), up 17 percent. The firm has yet to release its first-quarter earnings report.

Editor: Kim Taylor