Chinese online car rental service eHi to IPO in US despite fraud allegations

The US IPO of Chinese online car rental service eHi, which bought a stake in Chinese taxi app Kuaidi Dache last month, will proceed today despite allegations that the company has been misrepresenting the value and size of its fleet of vehicles.

According to an amendment to the company’s prospectus filed on November 13th, the company’s auditing firm received a report on November 12 from someone outside the company claiming to have inside information that eHi has significantly over-represented the value of some of its vehicles and over-represented the size of its fleet. The allegations are very similar to allegations of the same nature made in October of this year, and eHi’s filing states that after double-checking:

[…] we have concluded that the allegations in the November 12, 2014 communication are without merit and that the accounting treatment of the additional identified cars is consistent with our policies as described in the registration statement.

False or not, the allegations could be problematic for eHi, especially coming on the verge of its IPO. Elsewhere in the November 13th filing, eHi states that it is investigating “the possible theft of company information” following these allegations, and it has noted that the allegations could still seriously damage eHi’s reputation and even cause the company to incur significant financial losses in any legal proceedings that might result them.

(Source: SEC)