What happened

Shares of Chinese electric-vehicle (EV) maker Kandi Technologies (NASDAQ:KNDI) were up 10% as of 9:45 a.m. EST on Tuesday. The stock has been on a bumpy ride the past two months, more than doubling before dropping back down after a short-seller report. 

Today’s move is related to a new strategic business arrangement the company announced. 

So what 

Kandi said it has entered into an agreement with the Hangzhou branch of the Agricultural Bank of China. The agreement also includes rideshare company Zhejiang Ruiheng Technology and battery-swap company China Battery Exchange. China Battery is a subsidiary of Kandi, and Kandi owns 10% of Zhejiang Ruiheng.

white Kandi model K23 being charged in parking  garage

Kandi Model K23. Image source: Kandi Technologies.

The agreement will consist of the Agricultural Bank of China Hangzhou branch giving Kandi a $76.5 million line of credit that it will use to help fund a plan to add “300,000 government accredited pure electric vehicles” for a new ridesharing program. Kandi announced a trial of the ridesharing program in November, saying it had begun the delivery of 3,500 EVs to two different cities. 

Now what

Kandi’s stock jumped more than 55% in the month of November, but is back at levels prior to gains that resulted from a good third-quarter report and other positive EV sales data from China. 

The subsequent drop from November highs came after short-seller Hindenburg Research claimed some of Kandi’s sales data was being faked

Kandi should be considered a speculative investment, even though today’s agreement seems to give the company credibility that the Hindenburg report questioned. Speculative stocks can have a place in a diversified portfolio, but they should be portioned accordingly.

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