Full text
Exhibit 26
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In re: NIO, Inc., Securities Litigation, Docket No. 1:19-cv-01424 (E.D.N.Y. Mar 12, 2019), Court Docket
Part
Description
1
121
2
Declaration of Faten Sabry, Ph.D
3
Declaration of Robert A. Fumerton in Support of Defendants' Joint Memorandu
4
Exhibit A
5
Exhibit B
6
Exhibit C
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Exhibit D
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Exhibit E
9
Exhibit F
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Exhibit G
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Exhibit H
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Exhibit I
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Exhibit J
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Exhibit K
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Exhibit L
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Exhibit M
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Exhibit N
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Exhibit O
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Exhibit P
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Exhibit Q
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Exhibit R
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Exhibit S
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Exhibit T
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Exhibit U
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Exhibit V
26
Exhibit W
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Exhibit X
Multiple Documents
© 2023 Bloomberg Industry Group, Inc. All Rights Reserved. Terms of Service
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In re: NIO, Inc., Securities Litigation, Docket No. 1:19-cv-01424 (E.D.N.Y. Mar 12, 2019), Court Docket
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Exhibit Y
© 2023 Bloomberg Industry Group, Inc. All Rights Reserved. Terms of Service
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Exhibit S
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2903
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In the Matter Of:
In Re: NIO Inc. Securities Litigation
DR. ADAM WERNER
September 13, 2022
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·1
·2· · · · · UNITED STATES DISTRICT COURT
·3· · · · · EASTERN DISTRICT OF NEW YORK
·4· · · · ·CASE NO. 19-cv-1424 (NGG) (JRC)
·5· ·-----------------------------------------X
·6· ·IN RE:
·7· ·NIO, INC. SECURITIES LITIGATION
·8· ·-----------------------------------------X
·9
10
11
12
13· · · REMOTE DEPOSITION OF DR. ADAM WERNER
14
15
16
17
18· · · · · ·Tuesday, September 13, 2022
19· · · · · · · · ·8:39 a.m. (PT)
20
21
22
23· ·Reported by:
24· ·Joan Ferrara, RMR, FCRR
25· ·Job No. 2022-858476
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 1
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·1
·2
·3
·4· · · · · · · · · · · ·September 13, 2022
·5· · · · · · · · · · · ·8:39 a.m. (PT)
·6
·7
·8
·9· · · · · · ·Videotaped Deposition of DR. ADAM
10· ·WERNER, held remotely via Zoom, before Joan
11· ·Ferrara, a Registered Merit Reporter,
12· ·Federal Certified Realtime Reporter and
13· ·Notary Public.
14
15
16
17
18
19
20
21
22
23
24
25
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 2
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·1
·2· ·REMOTE APPEARANCES:
·3
·4· ·THE ROSEN LAW FIRM, P.A.
·5· ·Attorneys for Plaintiff and The Witness
·6· · · · · · ·270 Madison Avenue
·7· · · · · · ·40th Floor
·8· · · · · · ·New York, New York 10016
·9· ·BY:· · · ·YU SHI, ESQ.
10
11
12· ·SKADDEN ARPS SLATE MEAGHER & FLOM LLP
13· ·Attorneys for Defendants NIO, Inc., Padmasree
14· ·Warrior, Bin Li, Louis Hsieh, Lihong Qin,
15· ·Yaqin Zhang, Tian Cheng, Hai Wu and Xiang Li
16· · · · · · ·One Manhattan West
17· · · · · · ·New York, New York 10001
18· ·BY:· · · ·MICHAEL C. GRIFFIN, ESQ.
19· · · · · · ·JUDITH A. FLUMENBAUM, ESQ.
20· · · · · · ·ROBERT A. FUMERTON, ESQ.
21
22
23
24· · · · · · · · · · · · · · (Continued)
25
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 3
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·1
·2· ·REMOTE APPEARANCES:· (Continued)
·3
·4· ·PAUL WEISS RIFKIND WHARTON & GARRISON LLP
·5· ·Attorneys for Defendants Xianping Zhong and
·6· ·Zhaohui Li
·7· · · · · · ·1285 Avenue of the Americas
·8· · · · · · ·New York, New York 10019-6064
·9· ·BY:· · · ·XINSHU SYLVIA SUI, ESQ.
10
11· ·MILBANK LLP
12· ·Attorneys for Defendants Morgan Stanley & Co.
13· ·LLC, Goldman Sachs (Asia) L.L.C., JPMorgan
14· ·Securities LLC, Merrill Lynch, Pierce, Fenner
15· ·& Smith Inc., Deutsche Bank Securities Inc.,
16· ·Citigroup Global Markets Inc., Credit Suisse
17· ·Securities (USA) LLC, UBS Securities LLC, and
18· ·WR Securities, LLC
19· · · · · · ·55 Hudson Yards
20· · · · · · ·New York, New York 10001-2163
21· ·BY:· · · ·ELVIRA RAZZANO, ESQ.
22
23· ·ALSO PRESENT:
24· · · · · · ·ADRIEL OLVERA, Videographer
25
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 4
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·1
·2· ·---------------- I N D E X ---------------
·3· ·WITNESS· · · · · EXAMINATION BY· · · · PAGE
·4· ·DR. ADAM WERNER· MR. GRIFFIN· · · · · · ·8
·5· · · · · · · · · · MR. SHI· · · · · · · ·287
·6· · · · · · · · · · MR. GRIFFIN· · · · · ·287
·7
·8
·9· ·---------------- EXHIBITS ----------------
10· ·DEFENDANTS'· · · · · · · · · · · · · FOR ID.
11· · · ·(PROVIDED ELECTRONICALLY TO REPORTER)
12· ·Exhibit 22· ·Declaration of Dr. Adam
13· · · · · · · · Werner, June 21, 2022· · · · 11
14· ·Exhibit 23· ·Fourth Quarter and Full Year
15· · · · · · · · 2018 Financial Results Press
16· · · · · · · · Release· · · · · · · · · · · 168
17· ·Exhibit 24· ·Transcript from the 3/6/19
18· · · · · · · · Company's fourth quarter full
19· · · · · · · · year 2018 earnings· · · · · ·189
20· ·Exhibit 25· ·Article, "Chinese Electric
21· · · · · · · · Car Maker NIO Plunges Most
22· · · · · · · · Since Its IPO"· · · · · · · ·210
23
24
25· · · · · · · · · · · · · · · · ·(Continued)
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 5
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·1
·2· ·---------------- EXHIBITS ----------------
·3· ·DEFENDANTS'· · · · · · · · · · · · · ·FOR ID.
·4· · · ·(PROVIDED ELECTRONICALLY TO REPORTER)
·5
·6· ·Exhibit 26· ·Article, "Why Shares of
·7· · · · · · · · Chinese Electric Car Maker
·8· · · · · · · · NIO Fell 47 Percent in
·9· · · · · · · · March"· · · · · · · · · · · ·218
10· ·Exhibit 27· ·3/6/19 analyst report from
11· · · · · · · · JPMorgan· · · · · · · · · · ·220
12· ·Exhibit 28· ·3/7/19 analyst report from
13· · · · · · · · JPMorgan· · · · · · · · · · ·226
14· ·Exhibit 29· ·3/7/19 analyst report from
15· · · · · · · · Deutsche Bank report· · · · ·228
16
17
18
19
20
21
22
23
24
25
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
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Lexitas
888-267-1200 Page 6
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·1
·2· · · · MR. SHI:· Are we taking
·3· ·transcript orders now?
·4· · · · ·THE COURT REPORTER:· Sure.
·5· · · · ·MR. SHI:· Okay.· So we represent
·6· ·the Plaintiffs and we are going to
·7· ·order a standard transcript.
·8· · · · ·THE COURT REPORTER:· Okay.
·9· · · · ·MR. GRIFFIN:· Joan, we'll take
10· ·the expedited, like with the others.
11· · · · ·THE COURT REPORTER:· Yes, we have
12· ·that noted, Michael.· Thank you.
13· · · · ·THE VIDEOGRAPHER:· We are now on
14· ·the record.· Today's date is September
15· ·13, 2022 and the time is 8:39 a.m.
16· ·Pacific Time.
17· · · · ·This is the video deposition of
18· ·Dr. Adam Werner, in the matter of In
19· ·Re:· NIO Inc. Securities Litigation,
20· ·filed in the United States District
21· ·Court, Eastern District of New York,
22· ·Case No. 19-CV-1424.
23· · · · ·This deposition is taking place
24· ·via web videoconference with all
25· ·participants attending remotely.
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 7
YVer1f
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·1
·2· · · · · · ·My name is Adriel Olvera.· I am
·3· · · ·the videographer representing Lexitas.
·4· · · · · · ·All counsel will be listed on the
·5· · · ·stenographic record.
·6· · · · · · ·Our court reporter today is Joan
·7· · · ·Ferrara representing Lexitas.
·8· · · · · · ·The court reporter will now swear
·9· · · ·in the witness.
10· ·DR. ADAM WERNER,
11· · · ·called as a witness, having been duly
12· · · ·sworn by a Notary Public, was examined
13· · · ·and testified as follows:
14· ·EXAMINATION BY
15· ·MR. GRIFFIN:
16· · · ·Q.· · Good morning, Doctor.
17· · · ·A.· · Good morning.
18· · · ·Q.· · Dr. Werner, is that your
19· ·preferred, how you prefer I address you?
20· · · ·A.· · Sure, that would be fine.
21· · · ·Q.· · Excellent.
22· · · · · · ·Can you state your full name for
23· ·the record?
24· · · ·A.· · Adam Davis Werner.
25· · · ·Q.· · And home or business address?
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 8
YVer1f
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · And what did you mean by your
·3· ·obligations to the parties who have engaged
·4· ·you in paragraph 3?
·5· · · ·A.· · Well, I don't -- to the best of
·6· ·my knowledge, I mean, I don't have any
·7· ·specific obligations to the parties who
·8· ·have engaged me, but I suppose someone more
·9· ·cynical than myself could say that experts
10· ·are sometimes hired to give opinions that
11· ·are -- what's the right term -- shaded
12· ·towards their client's best interests.
13· · · · · · ·Again, this isn't -- I mean,
14· ·look, I submit my report, it's an
15· ·independently prepared report, no
16· ·discussions with outside parties or the
17· ·parties that have retained me have in any
18· ·way affected the opinion that is presented
19· ·here in my declaration.
20· · · ·Q.· · Okay.· So to be clear, sitting
21· ·here, you don't think you have any
22· ·obligation to Plaintiff's counsel who hired
23· ·you, correct?
24· · · ·A.· · That is correct.
25· · · ·Q.· · And you don't view any conflict
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
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Lexitas
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·1· · · · · · · ·DR. A. WERNER
·2· ·between your duty to the Court and any
·3· ·obligations you would have to any other
·4· ·party?
·5· · · ·A.· · Well, what other obligations
·6· ·would I have to other parties?
·7· · · ·Q.· · That's what I'm asking you,
·8· ·Doctor, any obligation you have to any
·9· ·other party.
10· · · ·A.· · Right, and I guess to the extent
11· ·that I can't think of any obligation that I
12· ·have to another party, the answer to your
13· ·question is -- well, could you reask the
14· ·question?
15· · · ·Q.· · Let me ask it differently.
16· · · · · · ·If you don't believe you have any
17· ·obligation to Plaintiff's counsel that
18· ·engaged you, why did you include paragraph
19· ·3 in your declaration?
20· · · ·A.· · It's typically what I would
21· ·include in my reports.
22· · · ·Q.· · Did you personally write
23· ·paragraph 3?
24· · · ·A.· · At some point in my life, yes.
25· · · ·Q.· · You didn't personally write
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
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Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
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Lexitas
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·1· · · · · · · ·DR. A. WERNER
·2· ·paragraph 3 for this case in particular?
·3· · · ·A.· · Well, I may have cut and pasted
·4· ·this from a previous report into this
·5· ·paragraph.
·6· · · ·Q.· · Do you --
·7· · · ·A.· · I don't know if that falls under
·8· ·the guise of preparing it separately for
·9· ·this report.
10· · · ·Q.· · Do you recall when you first
11· ·drafted the language in paragraph 3?
12· · · ·A.· · I do not.
13· · · ·Q.· · Do you recall from what report
14· ·you copied it for this declaration?
15· · · ·A.· · I do not.
16· · · ·Q.· · Are there other portions of your
17· ·declaration in this case that are copied
18· ·from prior reports or declarations?
19· · · ·A.· · Well, maybe "copied" is the wrong
20· ·term, but yes, there are other sections
21· ·such as -- if you look at paragraph 4,
22· ·right, I don't write that paragraph from
23· ·scratch every time I prepare a report.
24· ·It's just the common description of my
25· ·background.
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
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Lexitas
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · Are there any paragraphs
·3· ·pertaining to your opinions in this case
·4· ·that were copied from prior reports or
·5· ·declarations?
·6· · · ·A.· · I'm sure there were.
·7· · · ·Q.· · Can you identify any?
·8· · · ·A.· · Well, certainly to the extent
·9· ·that I'm discussing a general methodology
10· ·at the end of my report, that's probably
11· ·been presented in other reports.· I may
12· ·have tweaked it a little bit for this
13· ·report.
14· · · · · · ·Some might have discussions
15· ·about, you know, the tenets of market
16· ·efficiency, how courts have thought about
17· ·market efficiency in the past, those have
18· ·probably been use in other reports.
19· · · ·Q.· · Did you receive assistance in
20· ·preparing this report?
21· · · ·A.· · I did.
22· · · ·Q.· · Who assisted you in the
23· ·preparation of this report?
24· · · ·A.· · Alex Huang -- let me spell that
25· ·last name for you, H-U-A-N-G.· Drew
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
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·1· · · · · · · ·DR. A. WERNER
·2· ·Guardano -- and I'm not going to try
·3· ·spelling that, but I believe if you just
·4· ·sound it out, you should get the spelling
·5· ·correctly.
·6· · · · · · ·And then Miguel Villanueva, again
·7· ·just to the extent that Villanueva is a
·8· ·common name, just use the common spelling.
·9· · · ·Q.· · And who are Alex, Drew and
10· ·Miguel?
11· · · ·A.· · They are employees of
12· ·Crowinshield Financial Research.
13· · · ·Q.· · Have they assisted you on
14· ·creating reports and declarations in
15· ·securities litigations prior to this case?
16· · · ·A.· · They have.
17· · · ·Q.· · That's true for all three?
18· · · ·A.· · Yes.
19· · · ·Q.· · Did Plaintiff's counsel here
20· ·review your report before it was submitted?
21· · · ·A.· · They certainly, to the best of my
22· ·knowledge, yes.
23· · · ·Q.· · Did they give you any feedback or
24· ·comments on it?
25· · · ·A.· · I believe they made some
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
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·1· · · · · · · ·DR. A. WERNER
·2· ·than the class period that was alleged in
·3· ·Plaintiff's Complaint?
·4· · · ·A.· · To the best of my understanding,
·5· ·yes.
·6· · · ·Q.· · Do you have any idea why the
·7· ·relevant period you were asked to use is
·8· ·different than the class period that was
·9· ·alleged in the Complaint?
10· · · ·A.· · I do not.
11· · · ·Q.· · Do you know what the significance
12· ·of the starting date for the relevant
13· ·period, October 8, 2018, is?
14· · · ·A.· · I do not.
15· · · ·Q.· · Do you know what the significance
16· ·of the end date for the relevant period,
17· ·which is March 5, 2019, is?
18· · · ·A.· · I believe that was the end of the
19· ·class period.
20· · · ·Q.· · And do you know if any
21· ·significant events are alleged to have
22· ·occurred at that time?
23· · · ·A.· · March 5, 2019?
24· · · ·Q.· · Correct.
25· · · ·A.· · Right.· So I think what I read
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
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·1· · · · · · · ·DR. A. WERNER
·2· ·from this when I was reading from my
·3· ·summary when you were asking about
·4· ·Plaintiff's allegations -- so right,
·5· ·Plaintiffs allege the truth about NIO's
·6· ·Shanghai facility was revealed on March 6,
·7· ·2019.
·8· · · · · · ·To the best of my -- best of my
·9· ·recollection, that is correct.· But the
10· ·actual disclosure was on March 5, 2019.
11· ·This should have probably said that rather
12· ·than revealed on March 6, 2019, it should
13· ·have said revealed on March 5, 2019 after
14· ·the markets closed and, thus, if you were
15· ·looking for a stock price reaction with
16· ·respect to whether or not this information
17· ·had any impact on the stock, you'd want to
18· ·look at the March 6th price change.
19· · · ·Q.· · Would you like to amend this
20· ·paragraph of your declaration?
21· · · ·A.· · If that helps clarify the record,
22· ·I'm happy to do it.
23· · · ·Q.· · Well, I'm asking you, Doctor.
24· · · ·A.· · Well, I guess my question to you
25· ·is, is it causing confusion?· Because to me
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·1· · · · · · · ·DR. A. WERNER
·2· ·it's not causing confusion.· If it's
·3· ·causing confusion for the record, I'm happy
·4· ·to amend it.
·5· · · ·Q.· · What disclosure that was issued
·6· ·aftermarket on March 5th are you referring
·7· ·to?
·8· · · ·A.· · I believe it was the -- well,
·9· ·again, let's be specific.· Right, so
10· ·looking at paragraph 52 of my report, on
11· ·March 5th, 2019, after the close of
12· ·trading, NIO announced its Q4 and fiscal
13· ·year 2018 financial results press release
14· ·that it had terminated its plans for
15· ·constructing the Shanghai facility.
16· · · · · · ·During the conference call with
17· ·investors, NIO explained that the reason
18· ·for the plan's termination due to new
19· ·policies introduced by the Chinese --
20· ·excuse me -- that the reason for the plan's
21· ·termination -- it should say "was" -- due
22· ·to new policies introduced by Chinese
23· ·Government authorities.
24· · · ·Q.· · So the disclosures that you are
25· ·referencing are the company's Q4 and fiscal
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·1· · · · · · · ·DR. A. WERNER
·2· ·situation.· I'm being specific about this
·3· ·because I've seen companies, let's say in
·4· ·Brazil, right, and some article comes out
·5· ·on a chat board in Brazil that no one
·6· ·really sees and then, you know, a day or
·7· ·two later that news is translated and
·8· ·people have a reaction to it.
·9· · · · · · ·So it's really a question of
10· ·dispersion of that information and how vast
11· ·the dispersion is.
12· · · ·Q.· · Are you drawing a distinction
13· ·between information that's publicly
14· ·available in the U.S. versus other
15· ·countries?
16· · · ·A.· · No.· I was just using that as an
17· ·example of something where it may take time
18· ·to digest information for the market.
19· · · ·Q.· · And, similarly, are you drawing
20· ·any distinction between information that's
21· ·publicly available in English as opposed to
22· ·another language?
23· · · ·A.· · I'm not, no.
24· · · ·Q.· · So with respect to NIO, for
25· ·example, NIO is based in China, correct?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · To the best of my knowledge, yes.
·3· · · ·Q.· · So you would consider information
·4· ·that is publicly available in China about
·5· ·NIO to be reflected in its stock price?
·6· · · ·A.· · A large corporation like that,
·7· ·yes.
·8· · · ·Q.· · What about physical information?
·9· ·Like, for example, a construction site.· Do
10· ·you consider that to be public?
11· · · ·A.· · That's something I would have to
12· ·think about.· I mean, I have no reason to
13· ·think people wouldn't be aware of
14· ·construction of a facility, but you know,
15· ·if you're talking about hypothetical
16· ·examples or situations -- I mean, can
17· ·people be building something and people be
18· ·unaware of it?· Sure.· I mean, if I'm
19· ·building something in an underground
20· ·bunker, people may not be aware of my
21· ·construction.
22· · · ·Q.· · And if they were building it on
23· ·Fifth Avenue in Manhattan, they probably
24· ·would be aware of it, right?
25· · · ·A.· · I assume that's correct.· Now
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·1· · · · · · · ·DR. A. WERNER
·2· ·again, to the extent there might be
·3· ·scaffolding on it, they might not know what
·4· ·they're constructing, but I think generally
·5· ·your statement is correct.
·6· · · ·Q.· · Notwithstanding the scaffolding,
·7· ·they could see construction underway,
·8· ·correct?
·9· · · ·A.· · Correct.
10· · · ·Q.· · Setting aside the hypotheticals,
11· ·the issue in this case is whether the
12· ·Shanghai facility was under construction.
13· · · · · · ·Do you believe the status of that
14· ·construction is publicly available
15· ·information?
16· · · ·A.· · Well, clearly, to the best of my
17· ·understanding, that's what Plaintiffs are
18· ·alleging, but I have an independent --
19· · · ·Q.· · Sorry, I didn't mean to cut you
20· ·off.
21· · · ·A.· · I haven't independently verified
22· ·that.
23· · · ·Q.· · You haven't independently
24· ·verified whether construction was, in fact,
25· ·underway?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · To the extent I'm in the U.S. and
·3· ·I wasn't in China, no, I don't know one way
·4· ·or the other.
·5· · · ·Q.· · I understand.· But my question is
·6· ·slightly different, not whether
·7· ·construction was, in fact, underway, but
·8· ·whether the fact of construction being
·9· ·underway or not was publicly available.
10· · · · · · ·Do you have an opinion on that
11· ·question?
12· · · ·A.· · I don't believe that's something
13· ·I've looked at as of today.
14· · · ·Q.· · Sitting here today, do you have
15· ·an opinion on it?· I'm now asking you to
16· ·consider it.
17· · · ·A.· · Right.
18· · · ·Q.· · The status of a construction site
19· ·in Shanghai is publicly available
20· ·information?
21· · · ·A.· · I believe that's what Plaintiffs
22· ·are alleging.· I have not independently
23· ·verified that.
24· · · ·Q.· · Again, I just want to be clear,
25· ·Doctor.· I apologize for belaboring this.
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·1· · · · · · · ·DR. A. WERNER
·2· · · · · · ·I'm not asking you whether or not
·3· ·construction was underway or whether any
·4· ·new construction was underway.
·5· · · · · · ·My question simply is whether or
·6· ·not a construction site had begun publicly
·7· ·available information?
·8· · · ·A.· · Right, and so again, it's going
·9· ·to depend on the situation.
10· · · ·Q.· · Well, I'm asking you about this
11· ·situation here, in this case.
12· · · ·A.· · So for this particular -- so
13· ·you're talking about the Shanghai facility?
14· · · ·Q.· · Correct.
15· · · ·A.· · I have no knowledge, one way or
16· ·the other, whether or not that was publicly
17· ·available information.
18· · · ·Q.· · Presumably anyone in Shanghai
19· ·could have walked past the site and seen
20· ·whether or not construction was underway,
21· ·correct?
22· · · · · · ·MR. SHI:· Objection.· Form.
23· · · ·A.· · Right.· I mean, I have no idea
24· ·where the construction was being done.· So
25· ·could someone walk by it?· I don't know. I
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·1· · · · · · · ·DR. A. WERNER
·2· ·haven't been to Shanghai before.· I'm not
·3· ·familiar with the terrain and the layout.
·4· · · · · · ·So, you know, it's like if you
·5· ·came to Pismo Beach and I said, hey,
·6· ·there's some construction going on, you
·7· ·know, at the tip of some beach that's
·8· ·cordoned off by the government, people may
·9· ·not -- people obviously can't walk by there
10· ·and see the construction, but the
11· ·construction is occurring.
12· · · ·Q.· · Do you have any reason to believe
13· ·that whether or not construction was
14· ·underway at the Shanghai facility was not
15· ·publicly available to people physically
16· ·located in Shanghai?
17· · · ·A.· · I have no opinion one way or the
18· ·other.
19· · · ·Q.· · Okay.· Now as part of your
20· ·analysis, you address the Cammer factors,
21· ·correct?
22· · · ·A.· · That is correct.
23· · · ·Q.· · And the first Cammer factor deals
24· ·with average trading volume?
25· · · ·A.· · Correct.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · And in your opinion, average
·3· ·trading volume above 1 or 2 percent of a
·4· ·stock's total outstanding shares is
·5· ·indicative of an efficient market, correct?
·6· · · ·A.· · Well, I think that's the Court's
·7· ·opinion, yes.
·8· · · ·Q.· · And do you agree with that
·9· ·standard?
10· · · ·A.· · Generally, yes.
11· · · ·Q.· · Have you ever --
12· · · ·A.· · It's the one I -- sorry.
13· · · ·Q.· · Go ahead.
14· · · ·A.· · It's the one I've adopted for the
15· ·purposes of testing market efficiency
16· ·across, you know, hundreds of cases.
17· · · ·Q.· · And that's the standard you
18· ·applied in this case, correct?
19· · · ·A.· · That is correct.
20· · · ·Q.· · Now, you state that the average
21· ·trading volume of NIO's ADS during the
22· ·relevant period was 45.68 percent of total
23· ·outstanding shares, correct?
24· · · ·A.· · Let me get to that section of my
25· ·report.· That sounds accurate.· I'm sorry,
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·1· · · · · · · ·DR. A. WERNER
·2· ·companies?
·3· · · ·A.· · In this case, yes.
·4· · · ·Q.· · And analysts gather and
·5· ·independently generate information about
·6· ·companies and disseminate such information
·7· ·to their clients, right?
·8· · · ·A.· · That sounds like something I've
·9· ·written.
10· · · ·Q.· · Good ear.
11· · · · · · ·The more analysts covering a
12· ·security, the more likely it is that the
13· ·market will timely incorporate any new
14· ·information, right?
15· · · ·A.· · Well, so, I'm not quite -- if
16· ·that's what I've stated, I'm not quite sure
17· ·that that's correct.· I mean, if you're
18· ·talking about, you know, 20 versus 30
19· ·analysts, there's going to be a marginal
20· ·difference in how quickly the information
21· ·is incorporated in the stock price -- you
22· ·know, probably not.
23· · · ·Q.· · So you're saying that the
24· ·marginal impact can vary depending on
25· ·exactly how many analysts we're talking
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·1· · · · · · · ·DR. A. WERNER
·2· ·about?
·3· · · ·A.· · Right, as well as the analyst's
·4· ·reputation.
·5· · · ·Q.· · Could you take a look at page 8,
·6· ·paragraph 19 of your report.· That's the
·7· ·paragraph I was referring to.
·8· · · · · · ·In paragraph 19 you state, "Put
·9· ·another way, the more analysts covering a
10· ·security, the more likely it is that the
11· ·market for that security will timely
12· ·incorporate new information in that
13· ·security's price."
14· · · · · · ·You agree with that statement,
15· ·right?
16· · · ·A.· · Again, I mean, I should probably
17· ·put some qualifiers on that, again using
18· ·the example that I referred to earlier, but
19· ·generally that's true.
20· · · ·Q.· · Do you believe the statement in
21· ·paragraph 19 is inaccurate?
22· · · ·A.· · I don't believe it's inaccurate.
23· ·I just don't think there is necessarily a
24· ·linear relationship between the market's
25· ·incorporation of information and the number
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·1· · · · · · · ·DR. A. WERNER
·2· ·of analysts.
·3· · · · · · ·And again, so right, if I'm
·4· ·looking at two versus three analysts, the
·5· ·marginal contribution of that third analyst
·6· ·might be different than a marginal
·7· ·contribution of the 29th analyst.
·8· · · ·Q.· · Do you believe paragraph 19 is
·9· ·misleading as currently written without the
10· ·caveats that you've added today?
11· · · ·A.· · I don't think so.
12· · · ·Q.· · Okay.
13· · · ·A.· · I think generally that's true.
14· · · ·Q.· · You mentioned the quality of the
15· ·analysts being relevant, right?
16· · · ·A.· · I did.
17· · · ·Q.· · Do you think that, generally
18· ·speaking, analyst reports are accurate and
19· ·reliable?
20· · · · · · ·MR. SHI:· Objection to form.
21· · · ·A.· · Generally speaking?
22· · · · · · ·MR. SHI:· Objection to form.
23· · · ·A.· · That's not something I've ever
24· ·thought about.
25· · · ·Q.· · Sitting here today, and you could
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · As I sit here today, I don't
·3· ·recall.
·4· · · ·Q.· · You don't recall one way or the
·5· ·other?
·6· · · ·A.· · That is correct.
·7· · · ·Q.· · Would you expect to recall that
·8· ·information if they did say that?
·9· · · ·A.· · In this day and age, it's very
10· ·possible that I -- the answer to that
11· ·question is no.
12· · · ·Q.· · Well, whether or not the Shanghai
13· ·facility is under construction is the
14· ·central issue in this case, correct?
15· · · ·A.· · I mean, I don't know if it's the
16· ·central issue.· It's certainly an issue.
17· · · ·Q.· · An important issue?
18· · · ·A.· · Sure.
19· · · ·Q.· · But you wouldn't remember, one
20· ·way or the other, if you had read an
21· ·analyst reporting that, in fact, it was not
22· ·under construction?
23· · · ·A.· · Again, as I sit here today, I
24· ·don't recall.
25· · · ·Q.· · Do you recall if any of the
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·1· · · · · · · ·DR. A. WERNER
·2· ·analyst reports you reviewed claimed that
·3· ·NIO terminated the Shanghai facility
·4· ·project because it did not have sufficient
·5· ·revenue or cash flows?
·6· · · ·A.· · As I sit here today, I don't
·7· ·recall.
·8· · · ·Q.· · Did any of the analyst reports
·9· ·you reviewed claim that NIO did not, in
10· ·fact, have sufficient revenue or cash flows
11· ·to complete the Shanghai facility?
12· · · ·A.· · As I sit here today, I don't
13· ·recall.
14· · · ·Q.· · Now, all of the --
15· · · ·A.· · Actually, so if you're talking
16· ·about -- so let me make a distinction.
17· · · · · · ·So if you're talking about these
18· ·particular analyst reports, I don't recall.
19· · · · · · ·Let's turn to.
20· · · ·Q.· · Try 50 to 51.· Are you looking
21· ·for the list of documents you considered?
22· · · ·A.· · No.
23· · · ·Q.· · Doctor, let me ask you this.· The
24· ·26 analyst reports that you listed in
25· ·Exhibit 4 and reviewed and relied on here,
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·1· · · · · · · ·DR. A. WERNER
·2· ·all occurred before the alleged corrective
·3· ·disclosure, correct?
·4· · · ·A.· · That is correct.
·5· · · ·Q.· · Did you review any analyst
·6· ·reports after the alleged corrective
·7· ·disclosure?
·8· · · ·A.· · I certainly asked for them.· And
·9· ·we did not have access to them, so I relied
10· ·on a news article to garner analyst
11· ·opinions about that.
12· · · ·Q.· · Who did you ask for the analyst
13· ·reports following the corrective
14· ·disclosure?
15· · · ·A.· · The people at Crowninshield.
16· · · ·Q.· · And what did they tell you in
17· ·response to that request?
18· · · ·A.· · That they didn't have access to
19· ·them.
20· · · ·Q.· · Where did you obtain the 26
21· ·analyst reports that you did review and
22· ·rely on?
23· · · ·A.· · To the best of my knowledge,
24· ·Thomson Eikon.
25· · · ·Q.· · And did you discuss with Thomas
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·1· · · · · · · ·DR. A. WERNER
·2· ·Icon on the additional analyst reports
·3· ·after the corrective disclosure?
·4· · · ·A.· · That's where they would have
·5· ·looked.
·6· · · ·Q.· · Do you have any idea why the
·7· ·analyst reports after the corrective
·8· ·disclosure allegedly were not available?
·9· · · ·A.· · Well, they may have been
10· ·available.· Look, to the extent we were
11· ·talking about your client NIO, I'm sure
12· ·Plaintiff's counsel could subpoena them.
13· ·So does that make them available?· I don't
14· ·know.· They weren't available, to the best
15· ·of my knowledge, through Thomas Icon.
16· · · · · · ·But, since we were talking about,
17· ·you know, investment bank is talking about
18· ·things like the construction of the
19· ·facility, so if I'm looking at paragraph
20· ·71, we see that analyst and market
21· ·participants noted that the companies
22· ·reported financial results were
23· ·disappointing and that the termination of
24· ·the plan to construct the Shanghai facility
25· ·was a negative surprise.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · I understand, Doctor, and we're
·3· ·going to get to paragraph 71, but for now I
·4· ·just want to focus on these analyst
·5· ·reports.
·6· · · · · · ·You said that you asked for the
·7· ·analyst reports after the corrective
·8· ·disclosure, right?
·9· · · ·A.· · Well, from the last report
10· ·through the corrective disclosure, that is
11· ·correct.· I believe the last analyst report
12· ·was for February 15th.
13· · · ·Q.· · Correct.· And you wanted to
14· ·review the analyst reports after the
15· ·corrective disclosure, right?
16· · · · · · ·MR. SHI:· Objection.· Form.
17· · · ·A.· · That is correct.· I'm sorry, I
18· ·didn't hear the objection.
19· · · · · · ·MR. SHI:· Form.
20· · · ·Q.· · So I'll ask you again.· You
21· ·wanted to review the analyst reports that
22· ·followed the alleged corrective disclosure
23· ·here, right?
24· · · ·A.· · I asked if we had additional
25· ·analyst reports that covered that time
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·1· · · · · · · ·DR. A. WERNER
·2· ·period.
·3· · · ·Q.· · Did you want to review those
·4· ·analyst reports?
·5· · · ·A.· · To the extent we had access to
·6· ·them, yes.
·7· · · ·Q.· · Why did you want to review the
·8· ·analyst reports that followed the
·9· ·corrective disclosure here, alleged
10· ·corrective disclosure?
11· · · ·A.· · Well, again, because I wanted to
12· ·verify things like these statements in
13· ·paragraph 71 were accurate.· I have no
14· ·reason to think they're inaccurate and they
15· ·come from reliable data sources.· You know,
16· ·if I can go to source material, I guess
17· ·normally I'd prefer to go to source
18· ·material than repetition of source material
19· ·or analysis of source material.
20· · · ·Q.· · Was the securities analyst
21· ·reaction it news regarding NIO relevant to
22· ·your analysis here?
23· · · ·A.· · It certainly informed my opinion.
24· · · ·Q.· · In what way did it inform your
25· ·opinion?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · Well, again, so we're talking
·3· ·about -- let's go back to paragraph 71.
·4· ·The question -- I mean, for market
·5· ·efficiency, the question is really does
·6· ·news move the stock.· And so to the extent
·7· ·that there was news being presented by,
·8· ·among other people, analysts, that would
·9· ·inform my opinion as to whether or not the
10· ·stock was efficient -- or this particular
11· ·stock traded in an efficient market.
12· · · ·Q.· · And the opinion of the securities
13· ·analyst as to the favorability of that news
14· ·is also relevant to your analysis, right?
15· · · ·A.· · Well, again, it informs my
16· ·opinion.
17· · · ·Q.· · You also mentioned, and I'm
18· ·looking at paragraph 31 on page 12 --
19· · · ·A.· · Actually, can we -- so we've been
20· ·going for about an hour and 15, minutes.
21· ·Can we take a break?
22· · · ·Q.· · Sure.
23· · · ·A.· · I mean, if you're like going to
24· ·ask me one more question on this, I'm happy
25· ·to continue, but otherwise --
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · Yeah, give me five more minutes.
·3· · · ·A.· · Okay.· All right.· So reask your
·4· ·question, please.
·5· · · ·Q.· · Sure.· Page 12, paragraph 31.
·6· · · ·A.· · Okay.
·7· · · ·Q.· · In paragraph 31 you reference,
·8· ·"Over 109 news stories, press releases and
·9· ·SEC filings featuring NIO."
10· · · · · · ·That appeared in financial
11· ·publications during the relevant period,
12· ·correct?
13· · · ·A.· · That is correct.
14· · · ·Q.· · Did you review all of those 109
15· ·news stories, press releases and SEC
16· ·filings?
17· · · ·A.· · I don't believe I reviewed every
18· ·single one of those.
19· · · ·Q.· · Did someone on your team review
20· ·them?
21· · · ·A.· · Yes.
22· · · ·Q.· · So at least one of the three
23· ·individuals we mentioned earlier would have
24· ·reviewed all 109 of those press releases,
25· ·news stories and SEC filings?
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·1· · · · · · · ·DR. A. WERNER
·2· ·that was announced, I would expect to have
·3· ·an impact on the stock price.· When I say
·4· ·"expect," I should say ex-ante.
·5· · · ·Q.· · So you expected ex-ante each of
·6· ·the four events you chose to have a
·7· ·statistically significant impact on the
·8· ·stock price?
·9· · · ·A.· · No.· Those are pieces of news
10· ·that often times impact a securities, a
11· ·stock price.· I had no expectation, one way
12· ·or the other, whether or not it would
13· ·actually move the stock price.
14· · · ·Q.· · Okay.· So walk me through your
15· ·process for selecting these four particular
16· ·events.
17· · · ·A.· · Right.· So we had our 109
18· ·articles or whatever it was, we had our
19· ·analyst reports, we went through them and I
20· ·looked at days where you would normally
21· ·expect some type of stock price movement.
22· · · · · · ·So, for instance, you know, often
23· ·times we'll look at earnings reports.· So
24· ·in this case I looked at the earnings
25· ·announcements associated with November 6th,
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·1· · · · · · · ·DR. A. WERNER
·2· ·right.· Often times that is a news -- what
·3· ·someone would consider a news day.
·4· · · · · · ·To the extent that that news met
·5· ·expectations, the fact that there was not a
·6· ·statistically significant stock price
·7· ·movement is consistent with market
·8· ·efficiency.
·9· · · ·Q.· · Did you consider using any other
10· ·events besides the four that you ultimately
11· ·selected for your study?
12· · · ·A.· · I did not.
13· · · ·Q.· · Now, you claim to have focused
14· ·your event study on disclosures of
15· ·information related to allegations in the
16· ·Complaint, and that's in paragraph 50, is
17· ·that correct?
18· · · ·A.· · Well, it should say on a
19· ·disclosure of information related to the
20· ·allegations in the Complaint is the only
21· ·event with regards to allegation of
22· ·Complaint with the alleged corrective
23· ·disclosure.
24· · · ·Q.· · Sorry, what should paragraph 50
25· ·say?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · By focusing an event study on a
·3· ·disclosure of information related to the
·4· ·allegations in the Complaint, since there
·5· ·was only one disclosure in this case.
·6· · · ·Q.· · And so the other three, the first
·7· ·three events in your event study are not
·8· ·related to the allegations in the
·9· ·Complaint, correct?
10· · · ·A.· · I believe that's correct.
11· · · ·Q.· · Now, as part of your event study,
12· ·you created a regression model, right?
13· · · ·A.· · Correct.
14· · · ·Q.· · And part of that model was
15· ·dependent on what you termed a market
16· ·model, right?
17· · · ·A.· · Just let me get there as long as
18· ·we're going to talk about this.· The answer
19· ·to your question is that is correct.
20· · · ·Q.· · And you used a market model to
21· ·help control for market wide and industry
22· ·wide factors affecting the stock price,
23· ·correct?
24· · · ·A.· · That is correct.
25· · · ·Q.· · And so to do this you chose a
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·1· · · · · · · ·DR. A. WERNER
·2· ·market index and an industry index, right?
·3· · · ·A.· · That is correct.
·4· · · ·Q.· · How do you go about choosing a
·5· ·particular market index?
·6· · · ·A.· · Generally use the same market
·7· ·index, what's generally accepted as the
·8· ·market index in academic literature.
·9· · · ·Q.· · And that's the index you used
10· ·here?
11· · · ·A.· · Correct.
12· · · ·Q.· · That's referenced in paragraph
13· ·57?
14· · · ·A.· · Correct.
15· · · ·Q.· · And what about for the industry
16· ·index, how do you go about selecting an
17· ·appropriate industry index?
18· · · ·A.· · Well, to the extent that NIO was
19· ·an automobile manufacturer, its performance
20· ·was likely affected by sector news -- or
21· ·maybe more generally electric vehicles.
22· · · ·Q.· · Well, just stepping back for a
23· ·second before we get to NIO, just in
24· ·general when you're conducting an event
25· ·study you have to choose an industry index,
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·1· · · · · · · ·DR. A. WERNER
·2· ·what are the factors you're considering
·3· ·when choosing an industry index, generally
·4· ·speaking?
·5· · · ·A.· · What the company does.
·6· · · ·Q.· · So you're just looking for any
·7· ·industry index that overlaps with what the
·8· ·company does?
·9· · · ·A.· · It's a little bit more involved
10· ·than that.
11· · · ·Q.· · How so?
12· · · ·A.· · Well, so often times companies
13· ·will, you know, say -- in their financial
14· ·filings will compare themselves to other
15· ·companies.· So often times I'll construct
16· ·an index based on those comparisons or
17· ·they'll compare their performance to
18· ·certain indices, so often times I will
19· ·select those indices.
20· · · ·Q.· · And here you said you were
21· ·looking for an industry index that involved
22· ·automobiles and in particular electric
23· ·vehicles?
24· · · ·A.· · Correct.
25· · · ·Q.· · And the index you chose is the
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·1· · · · · · · ·DR. A. WERNER
·2· ·S&P 500 Automobile Manufacturers Index,
·3· ·correct?
·4· · · ·A.· · Correct.
·5· · · ·Q.· · As you cite in paragraph 57?
·6· · · ·A.· · Correct.
·7· · · ·Q.· · What companies make up the S&P
·8· ·500 Automobile Manufacturers Index?
·9· · · ·A.· · As I sit here today, I don't
10· ·recall.
11· · · ·Q.· · Did you recall at the time --
12· ·excuse me, did you know at the time you
13· ·drafted your report?
14· · · ·A.· · At some point I reviewed the
15· ·index.
16· · · ·Q.· · Do you have any idea what
17· ·companies are included in that index?
18· · · ·A.· · I mean, as I sit here today, it
19· ·would be speculation on my part.
20· · · ·Q.· · Can you name a single company
21· ·that's included in that index?
22· · · ·A.· · Well, I assume like Ford and GM
23· ·would probably be in it.
24· · · ·Q.· · Anyone else?
25· · · ·A.· · Again, beyond that, I'd be
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·1· · · · · · · ·DR. A. WERNER
·2· ·speculating.
·3· · · ·Q.· · Do you know if the composition of
·4· ·that index has changed over time?
·5· · · ·A.· · I would not be surprised if the
·6· ·composition of that index has changed over
·7· ·time.
·8· · · ·Q.· · Well, I guess more specifically,
·9· ·do you know if it's different today than it
10· ·was during of the relevant period?
11· · · ·A.· · It's personally possible that
12· ·it's different today than it was during the
13· ·relevant period.
14· · · ·Q.· · You don't know, one way or the
15· ·other?
16· · · ·A.· · No.
17· · · ·Q.· · And you mentioned you selected
18· ·this index because it was related first to
19· ·automobile, right, is that correct?
20· · · ·A.· · Well, electric vehicles, yes.
21· · · ·Q.· · Which electric vehicle companies
22· ·are included in this index?
23· · · ·A.· · As I sit here today, I don't
24· ·recall.
25· · · ·Q.· · But for purposes of your model it
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·1· · · · · · · ·DR. A. WERNER
·2· ·was important to you that electric vehicle
·3· ·companies were included in this index,
·4· ·right?
·5· · · ·A.· · Was it important that electric
·6· ·vehicles as opposed to gas-powered
·7· ·automobiles?
·8· · · ·Q.· · Right.
·9· · · ·A.· · It was certainly a factor that I
10· ·took into consideration.
11· · · ·Q.· · What other factors did you take
12· ·into consideration?
13· · · ·A.· · Well, that we're dealing with a
14· ·billion dollar automobile manufacturer.
15· · · ·Q.· · Did the geographic market factor
16· ·into your selection of industry index?
17· · · ·A.· · It did not.
18· · · ·Q.· · Why not?
19· · · ·A.· · No reason.· I doubt -- well, I
20· ·would be shocked if adding a
21· ·country-specific component to this, to my
22· ·model would alter the model results
23· ·significantly.
24· · · ·Q.· · Why?
25· · · ·A.· · Based on experience.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · What experience?
·3· · · ·A.· · Well, let's see, I'm 52.· So
·4· ·running event studies since, about 30
·5· ·years.
·6· · · ·Q.· · What, specifically, Doctor, in
·7· ·your 30 years of experience leads you to
·8· ·believe that adding a geographic market
·9· ·specific index would not change the results
10· ·of your analysis in this case?
11· · · ·A.· · Well, I didn't say it wouldn't
12· ·change my results.· I said it would not
13· ·change my results significantly.· Correct?
14· · · ·Q.· · Okay.· What in your 30 years of
15· ·experience leads you to believe that adding
16· ·a geographic market specific index in this
17· ·case would not significantly change your
18· ·results?
19· · · ·A.· · Again, if you're looking at a
20· ·billion dollar corporation with a global
21· ·company, it's selling cars all over the
22· ·world, generally that's not going to have a
23· ·big impact on a market model based on
24· ·looking at -- look, I've looked at, I don't
25· ·know how many Chinese corporations I've
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·1· · · · · · · ·DR. A. WERNER
·2· ·looked at with regards to this and
·3· ·generally with the larger companies --
·4· ·again, we're talking about a billion dollar
·5· ·company -- a country-specific index doesn't
·6· ·normally have a large impact on -- a
·7· ·significant impact on a market model.
·8· · · · · · ·I mean, if you want me to -- I'm
·9· ·happy to look at it if your expert is going
10· ·to go ahead and add an industry index, I'm
11· ·happy to review it and say, you know what,
12· ·this actually does make a significant
13· ·difference.· But, you know, as I sit here
14· ·today, you know, I did what I did, I
15· ·believe what I did is correct.
16· · · ·Q.· · When you reference a billion
17· ·dollar company, what metric are you
18· ·referring to there?
19· · · ·A.· · Market cap.
20· · · ·Q.· · Is it your understanding that NIO
21· ·sells its electric vehicles globally?
22· · · ·A.· · Well, I certainly know they sell
23· ·them in the U.S.
24· · · ·Q.· · And would you expect the U.S.
25· ·auto industry to affect sales of NIO's
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·1· · · · · · · ·DR. A. WERNER
·2· ·vehicles in China?
·3· · · ·A.· · Would I expect -- well, to the
·4· ·extent that U.S. automobile manufacturers
·5· ·sell cars in China, yes.
·6· · · ·Q.· · Do you know if any of the
·7· ·companies in the S&P 500 automobile
·8· ·manufacturers index sold electric vehicles
·9· ·in China?
10· · · ·A.· · Sold electric vehicles in China?
11· ·Not as I sit here today.
12· · · ·Q.· · How about sold any vehicles in
13· ·China?
14· · · ·A.· · Again, I mean, general knowledge,
15· ·my understanding is companies like Ford and
16· ·GM sell vehicles in China.· But do I
17· ·specifically know that for a fact, no, not
18· ·as I sit here today.
19· · · ·Q.· · But in general, you would expect
20· ·industry factors that affect GM and Ford to
21· ·also affect NIO?
22· · · ·A.· · To the extent they sell
23· ·automobiles in the U.S., yes -- well, in
24· ·general, yes.
25· · · ·Q.· · Did you consider using any other
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·1· · · · · · · ·DR. A. WERNER
·2· ·the trading day and right before the
·3· ·trading day.· As I sit here, I don't
·4· ·recall.· And the stock price moved.
·5· · · ·Q.· · And so any subsequent movements
·6· ·on future days were not relevant to this
·7· ·particular announcement?
·8· · · ·A.· · To this particular announcement?
·9· ·For the purposes of market efficiency?· No.
10· · · ·Q.· · Okay.· That's all I'm trying to
11· ·understand.
12· · · · · · ·Here you used a single day to
13· ·gauge the price reaction to this particular
14· ·event, right?
15· · · ·A.· · That is correct.
16· · · ·Q.· · Okay.· Can we flip to page 65?
17· ·It's Exhibit 9 of your report.
18· · · ·A.· · I'm there.
19· · · ·Q.· · Exhibit 9 of your declaration
20· ·presents the results of your event study,
21· ·correct?
22· · · ·A.· · That is correct.
23· · · ·Q.· · And it lists the residual return,
24· ·among other things, and T-statistic for
25· ·each day during the relevant period, is
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·1· · · · · · · ·DR. A. WERNER
·2· ·that right?
·3· · · ·A.· · That is correct.
·4· · · ·Q.· · So if we look at the second line
·5· ·of your chart, for October 9th, that's the
·6· ·date of the Bailey Gifford announcement,
·7· ·correct?
·8· · · ·A.· · Correct.
·9· · · ·Q.· · We see the 20.17 percent
10· ·logarithmic return, right?
11· · · ·A.· · Correct.
12· · · ·Q.· · And the T-statistic there is
13· ·5.13, right?
14· · · ·A.· · Correct.
15· · · ·Q.· · Because that is greater than
16· ·1.96, you deem this to be statistically
17· ·significant, right?
18· · · ·A.· · Correct.
19· · · ·Q.· · And that's what that little
20· ·asterisk at the end of the row indicates,
21· ·right?
22· · · ·A.· · Correct.
23· · · ·Q.· · The line right below that for
24· ·October 10th also indicates that there was
25· ·a statistically significant abnormal
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·1· · · · · · · ·DR. A. WERNER
·2· ·return, correct?
·3· · · ·A.· · It does.
·4· · · ·Q.· · Do you have any idea what caused
·5· ·that statistically significant abnormal
·6· ·return?
·7· · · ·A.· · As I sit here today, no.
·8· · · ·Q.· · But the fact that there was a
·9· ·statistically significant abnormal return
10· ·based on your model indicates to you that
11· ·there was some company-specific news that
12· ·day, is that right?
13· · · ·A.· · 95 percent of the time, yes. I
14· ·mean, 5 percent of -- we're going to
15· ·observe 5 percent statistically significant
16· ·days.· But as I sit here today, I don't
17· ·know one way or the other.
18· · · ·Q.· · If you look midway down the page,
19· ·November 1st also indicates a statistically
20· ·significant abnormal return, correct?
21· · · ·A.· · That is correct.
22· · · ·Q.· · Are you aware of any significant
23· ·company news regarding NIO on November 1st?
24· · · ·A.· · I don't believe that -- well, let
25· ·me --
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · It's not one of the four event
·3· ·dates that you chose, I could tell you.
·4· · · ·A.· · Okay.· So then no, as I sit here
·5· ·today, no.
·6· · · ·Q.· · Same for November 19th, which
·7· ·also indicates a statistically significant
·8· ·abnormal return?
·9· · · ·A.· · November 19th.· Can we agree that
10· ·if you're going to do this, we can
11· ·stipulate where you tell me whether or not
12· ·these are days I reviewed?
13· · · ·Q.· · Yes.· The four you reviewed are
14· ·October 9th, November 6th for the Q3
15· ·earnings, November 30th for the
16· ·resignation, and then March 6th for the
17· ·alleged corrective disclosure.
18· · · ·A.· · Thank you.
19· · · ·Q.· · It's not a memory test.
20· · · ·A.· · Okay.· I appreciate that.· You'd
21· ·be surprised how many lawyers think it is.
22· · · ·Q.· · Fair enough.
23· · · · · · ·Let me ask you the question this
24· ·way:· Other than those four days, are you
25· ·aware of any company-specific information
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·1· · · · · · · ·DR. A. WERNER
·2· ·that caused any statistically significant
·3· ·abnormal returns on any other date?
·4· · · ·A.· · During the relevant period?
·5· · · ·Q.· · Correct.
·6· · · ·A.· · I am not.
·7· · · ·Q.· · Okay.· All right.· Let's talk
·8· ·about the second event then that you chose.
·9· ·That was the Q3 -- excuse me, third quarter
10· ·earnings announcement on November 6th,
11· ·2018, correct?
12· · · ·A.· · I'm sorry, I need to just correct
13· ·what page are we on?
14· · · ·Q.· · Paragraph 65.
15· · · ·A.· · Paragraph 65.· Okay.
16· · · ·Q.· · Are you there?
17· · · ·A.· · I am.
18· · · ·Q.· · And you deemed this to be neutral
19· ·news for the company, right?
20· · · ·A.· · Ex-post, yes.
21· · · ·Q.· · And that was based on the
22· ·securities analyst's reactions to the
23· ·results, in particular their
24· ·characterization that the results were in
25· ·line with expectations?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · That certainly informed my
·3· ·opinion, yes.
·4· · · ·Q.· · Did anything else inform your
·5· ·opinion?
·6· · · ·A.· · I'm sure I looked at some
·7· ·additional news articles around that period
·8· ·of time that expressed similar sentiment,
·9· ·but these were the things that stuck out.
10· · · ·Q.· · And so the three sources that you
11· ·cite in this paragraph are the Deutsche
12· ·Bank analyst report, JP Morgan analyst
13· ·report, and Morgan Stanley analyst report,
14· ·correct?
15· · · ·A.· · That is correct.
16· · · ·Q.· · And again, you deemed the
17· ·reaction of these analysts to be relevant
18· ·to determining the significance of that
19· ·quarterly announcement, whether it was
20· ·positive, negative or neutral?
21· · · ·A.· · I don't think the statement as
22· ·you've -- the question as you've stated it
23· ·is correct.
24· · · ·Q.· · What do you disagree with in what
25· ·I asked?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · Reread the -- could you have the
·3· ·question reread, please?
·4· · · ·Q.· · Sure.
·5· · · · · · ·You deemed the reaction of these
·6· ·analysts to be relevant to determining the
·7· ·significance of that quarterly
·8· ·announcement, will it was positive,
·9· ·negative or neutral?
10· · · ·A.· · Ex-post, that is correct.
11· ·Ex-ante that is incorrect.
12· · · ·Q.· · And why is that incorrect
13· ·ex-ante?
14· · · ·A.· · Because I didn't -- you know, I
15· ·commonly look at news earnings days.· So
16· ·it's an earnings announcement, so I looked
17· ·at it.· Oftentimes that's something that
18· ·will move a stock price.
19· · · ·Q.· · And setting aside the securities
20· ·analyst's reports, do you have any
21· ·independent view of whether the third
22· ·quarter earnings were a positive, negative
23· ·or neutral development?
24· · · ·A.· · Beyond those reports and
25· ·presumably additional news articles I may
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·1· · · · · · · ·DR. A. WERNER
·2· · · · · · ·Do you see that?
·3· · · ·A.· · I do see that.
·4· · · ·Q.· · What is your basis for that
·5· ·assertion?
·6· · · ·A.· · Well, among other things, the
·7· ·Deutsche Bank report.
·8· · · ·Q.· · Again, you looked to one of the
·9· ·analysts reports' characterization of this
10· ·event to judge whether it was significant?
11· · · ·A.· · So when you use the word
12· ·"significant," that has a loaded meaning.
13· · · ·Q.· · What do you understand it to mean
14· ·when I say "significant"?
15· · · ·A.· · Well, so normally when we talk
16· ·about significance in a securities class
17· ·action context, we're usually talking about
18· ·statistically significant.
19· · · ·Q.· · Okay.
20· · · ·A.· · I'm sorry, I'm uncomfortable
21· ·using the term "significant."· If you want
22· ·to say important, something people normally
23· ·pay attention to, what might change the
24· ·overall information.
25· · · ·Q.· · I'll ask the question again more
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·1· · · · · · · ·DR. A. WERNER
·2· ·specifically.· But in general, what I'm
·3· ·trying to get at is good, bad, or neutral.
·4· ·So we're getting hung up on the word.· I'm
·5· ·not trying to trick you.· I don't know of a
·6· ·better word to describe that inquiry, but
·7· ·I'll just ask it that way.
·8· · · · · · ·You relied on the Deutsche Bank
·9· ·analyst report to gauge whether
10· ·Ms. Warrior's resignation was a positive,
11· ·negative, or neutral news event for the
12· ·company?
13· · · ·A.· · That certainly informed my
14· ·opinion, yes.
15· · · ·Q.· · Okay.· I'll try and stick with
16· ·that going forward, that formulation.
17· · · ·A.· · Okay.
18· · · ·Q.· · Sorry, so you also write here
19· ·that it did not affect the market's
20· ·perception of the company's ability to
21· ·operate and deliver on its goals.
22· · · · · · ·Is that a general standard that
23· ·you would apply to evaluating
24· ·company-specific news?
25· · · · · · ·Let me ask it this way:· Would
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·1· · · · · · · ·DR. A. WERNER
·2· ·you consider events that do not affect the
·3· ·company's ability to operate and deliver on
·4· ·its goals to be neutral?
·5· · · ·A.· · Not necessarily.
·6· · · ·Q.· · Why not?
·7· · · ·A.· · Well, it's going to depend on the
·8· ·situation.· Again, I have no understanding
·9· ·whatsoever about the, you know, Tim Cook's
10· ·individual or Apple's ability to continue
11· ·to manufacture its products, but I would
12· ·not be surprised that if Tim Cook resigns
13· ·out of nowhere, Apple's stock price is
14· ·going to move.
15· · · ·Q.· · How about this way, would you
16· ·consider an event that hinders the
17· ·company's ability to operate and deliver on
18· ·its goals to be a negative news event?
19· · · ·A.· · Negative, but not necessarily
20· ·statistically significant.
21· · · ·Q.· · Sure.· No numbers here, so can't
22· ·possibly gauge statistical significance.
23· ·I'm just trying to understand why you use
24· ·that particular phrase here.
25· · · ·A.· · That's just what I chose to use.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · Correct.
·3· · · ·Q.· · And this was not statistically
·4· ·significant in your opinion, correct?
·5· · · ·A.· · Correct.
·6· · · ·Q.· · All right.
·7· · · · · · ·MR. GRIFFIN:· I think we've been
·8· · · ·going for about an hour.· Do you want
·9· · · ·to take another break before we go to
10· · · ·the next event?
11· · · · · · ·THE WITNESS:· Yeah, actually
12· · · ·thank you so much for asking.· That's
13· · · ·very kind of you.
14· · · · · · ·MR. GRIFFIN:· Yep, sure.· Ten
15· · · ·minutes again?
16· · · · · · ·THE WITNESS:· Yeah, 10 minutes
17· · · ·would be good.· Works for us.· So
18· · · ·we'll be back around 2:10.
19· · · · · · ·MR. GRIFFIN:· Yep.
20· · · · · · ·THE VIDEOGRAPHER:· We are off the
21· · · ·record at 10:59 a.m.
22· · · · · · ·(Recess taken from 10:59 a.m.
23· · · ·11:12 a.m. PT)
24· · · · · · ·THE VIDEOGRAPHER:· We are back on
25· · · ·the record at 11:12 a.m.
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·1· · · · · · · ·DR. A. WERNER
·2· ·BY MR. GRIFFIN:
·3· · · ·Q.· · Dr. Werner, turning to the fourth
·4· ·and final event in your event study, that
·5· ·was the March 5, 2019 disclosure of NIO's
·6· ·fourth quarter and fiscal year 2018
·7· ·earnings results, correct?
·8· · · ·A.· · Correct.
·9· · · ·Q.· · And it was in connection with
10· ·this earnings announcement that NIO also
11· ·announced that it was terminating the
12· ·Shanghai facility project, correct?
13· · · ·A.· · Correct.
14· · · ·Q.· · Now, looking at paragraph 71,
15· ·which you referenced earlier, you state
16· ·that, "Analysts and market participants
17· ·noted that the company's reported financial
18· ·results were disappointing and that the
19· ·termination of the plan to construct the
20· ·Shanghai facility was a negative surprise."
21· · · · · · ·Do you see that?
22· · · ·A.· · I do.
23· · · ·Q.· · Who are the analysts that you're
24· ·referring to in that sentence?
25· · · ·A.· · Again, so these -- you know, I
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·1· · · · · · · ·DR. A. WERNER
·2· ·should have been -- I agree, I should have
·3· ·been more accurate -- these were analysts
·4· ·that showed up in terms of quotations from
·5· ·our literature review through the
·6· ·Lexis-Nexis search.· So things like --
·7· ·before we looked at flyonthewall, so that
·8· ·would be one such source.
·9· · · ·Q.· · So when you refer to analysts in
10· ·paragraph 71, you're not referring to the
11· ·investment bank coverage analysts like
12· ·Deutsche Bank and JPMorgan, Morgan Stanley,
13· ·et cetera?
14· · · ·A.· · Well, they may very well have
15· ·been the sources of those.· The problem is,
16· ·again, we, for whatever reason, Eikon,
17· ·Thomson Eikon didn't supply us with --
18· ·analyst reports after that, after February
19· ·15th were not available on Thomson Eikon.
20· ·And I don't know, I've asked my staff, they
21· ·don't know.
22· · · ·Q.· · So the sentence that you write,
23· ·though, in paragraph 71 is not referring to
24· ·those securities analysts that publish
25· ·regular coverage after earnings
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·1· · · · · · · ·DR. A. WERNER
·2· ·announcements by Deutsche Bank, JPMorgan,
·3· ·et cetera, that we discussed earlier,
·4· ·right?
·5· · · ·A.· · No.· What I'm saying is, as I sit
·6· ·here, I don't recall.· It very well could
·7· ·have, right.· But to the extent that I
·8· ·didn't have access to the source, the
·9· ·actual reports, I didn't cite to the actual
10· ·reports.
11· · · ·Q.· · Okay, sorry.· I'm not sure I'm
12· ·following entirely.· But are you saying
13· ·that you may have reviewed sources,
14· ·articles, news media, et cetera, that
15· ·referenced the analyst coverage reports
16· ·expressing these opinions and that's the
17· ·basis for your sentence in 71?
18· · · ·A.· · Correct.
19· · · ·Q.· · But sitting here today, you don't
20· ·recall any specific articles or any other
21· ·source that you reviewed that referenced
22· ·securities analysts describing the
23· ·termination of the plan to construct the
24· ·Shanghai facility as a negative surprise,
25· ·right?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · I do not specifically remember
·3· ·that.
·4· · · ·Q.· · Do you recall generally that you
·5· ·saw that, even if you don't recall the
·6· ·particular source?
·7· · · ·A.· · Well, I wouldn't have written
·8· ·that sentence if I hadn't seen that.
·9· · · ·Q.· · All right.· But it's not a
10· ·hypothetical or a conditional, Doctor.· You
11· ·did write the sentence.· So I'm just trying
12· ·to understand what your basis was for that
13· ·sentence.
14· · · ·A.· · Right.· And again, as I say, I
15· ·should have been more specific.· I'll be
16· ·happy to provide you with sources
17· ·afterwards.· But news articles that I
18· ·reviewed that quoted analysts.
19· · · ·Q.· · Okay.
20· · · ·A.· · Among other things.
21· · · ·Q.· · What are the other things?
22· · · ·A.· · As I sit here, I don't know.· I'm
23· ·just trying to be as general as possible.
24· · · ·Q.· · I would like you to be specific,
25· ·if you can.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · Right.· What I meant to say
·3· ·was --
·4· · · ·Q.· · I'm just asking --
·5· · · ·A.· · Right, no, I meant to say -- I
·6· ·was trying to be as specific as possible
·7· ·and as accurate as possible.· So I know
·8· ·that I remember reading analyst, quotes
·9· ·from analysts.· You know, I don't have a
10· ·full recollection of everything I saw.· So
11· ·I'm trying to be as accurate as possible,
12· ·how about that.
13· · · ·Q.· · Okay.
14· · · · · · ·Now, as before, right, setting
15· ·aside the stuff that you reviewed, did you
16· ·have -- well, let me strike it.· Let me
17· ·reask the question.
18· · · · · · ·Do you agree with the opinions
19· ·that you read in the sources that you
20· ·reviewed that the termination of the plan
21· ·to construct the Shanghai facility was a
22· ·negative surprise?
23· · · ·A.· · For the purposes of market
24· ·efficiency, that wasn't something I was
25· ·asked to do.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · And generally speaking --
·3· · · ·A.· · And you're -- sorry.· Usually in
·4· ·the context of price impact and loss
·5· ·causation, you're trying to measure the
·6· ·impact of that information.
·7· · · ·Q.· · And generally speaking, there is
·8· ·two ways you could go about measuring the
·9· ·price impact of an alleged
10· ·misrepresentation, you could try and do it
11· ·on the front end or on the back end, right?
12· · · ·A.· · Those are certainly -- that just
13· ·seems overly specific.· I mean, you can
14· ·have price impact throughout a class
15· ·period, right, so...
16· · · ·Q.· · I could be more specific.· One
17· ·way to measure price impact is to look at
18· ·the amount by which the stock price
19· ·increased when the alleged
20· ·misrepresentation was made, right?
21· · · ·A.· · Well, again, to the extent that
22· ·there was an alleged misrepresentation,
23· ·right, it could be an omissions case in
24· ·which case I wouldn't necessarily expect
25· ·any price impact.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · Okay.· Let's focus --
·3· · · ·A.· · At the front end, the front end.
·4· · · ·Q.· · Yeah.· So for a misrepresentation
·5· ·case, one way to measure price impact would
·6· ·be to look at the change in stock price
·7· ·when the alleged misrepresentation was
·8· ·made, right?
·9· · · ·A.· · I've certainly seen people do
10· ·that before.· That's certainly one way one
11· ·could look at it.
12· · · ·Q.· · Have you ever used that approach
13· ·before?
14· · · ·A.· · As I sit here today, I don't
15· ·recall.
16· · · ·Q.· · In any event, you couldn't do
17· ·that in this case, right?
18· · · ·A.· · You couldn't do that in this
19· ·case -- I believe that statement is
20· ·correct.
21· · · ·Q.· · It's impossible to show any
22· ·front-end impact at the time the alleged
23· ·misrepresentation was made because it was
24· ·contained in the company's IPO offering
25· ·documents before the stock was publicly
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·1· · · · · · · ·DR. A. WERNER
·2· ·traded, right?
·3· · · ·A.· · I'm not sure.· That question
·4· ·doesn't make sense to me.
·5· · · ·Q.· · I'll take a step back.
·6· · · ·A.· · I guess you're now making a
·7· ·distinction between misrepresentation and
·8· ·an omission.· An omission can be a
·9· ·misrepresentation.
10· · · ·Q.· · What if I say an affirmative
11· ·misrepresentation as to distinguish it from
12· ·an omission, does that help clarify the
13· ·question?
14· · · ·A.· · No.
15· · · ·Q.· · How about the alleged or false or
16· ·misleading statements in this case?
17· · · ·A.· · Again, I haven't looked at price
18· ·impact or loss causation in this case.· If
19· ·your expert decides to make a price impact
20· ·argument, that's something I will address
21· ·in a rebuttal report.· But for the purposes
22· ·of this report it's not something I looked
23· ·at.
24· · · ·Q.· · Do you have any view, one way or
25· ·another, as to whether you could determine
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·1· · · · · · · ·DR. A. WERNER
·2· ·in there.
·3· · · ·A.· · Yes, yes.
·4· · · ·Q.· · But that's the gist of it, right?
·5· · · · · · ·That wasn't the only reason that
·6· ·the company cited for terminating the
·7· ·Shanghai facility project, right?
·8· · · ·A.· · As I sit here, I don't recall.
·9· · · ·Q.· · All right.· Let's take a look at
10· ·the transcript again, Defendants' Exhibit
11· ·24.· If we look at page 4, at the bottom
12· ·paragraph starts, "On a separate note," do
13· ·you see that?
14· · · ·A.· · Yes.
15· · · ·Q.· · It says, "On a separate note we
16· ·would like to give you an update on our
17· ·plan for building the manufacturing
18· ·facilities in Jia Ding, Shanghai.· In 2017,
19· ·we signed a framework agreement and
20· ·memorandum with the government and related
21· ·NDs in Jia Ding, Shanghai to building a
22· ·manufacturing plant for NIO.· Recently, we
23· ·have agreed in principal that these
24· ·contractual counterparties, with our
25· ·contractual counterparties, to terminate
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·1· · · · · · · ·DR. A. WERNER
·2· ·the plan of this manufacturing plant.
·3· ·These decisions are made based on two
·4· ·reasons."
·5· · · · · · ·Do you see where I've read so
·6· ·far?
·7· · · ·A.· · I do.
·8· · · ·Q.· · So during the conference call,
·9· ·the company actually explained there were
10· ·two separate reasons for their decision to
11· ·terminate the factory, correct?
12· · · ·A.· · At least in this portion of the
13· ·conference call, yes.
14· · · ·Q.· · So continuing with the bottom
15· ·paragraph on page 4, it says, "First, in
16· ·2018, a new policy was issued by government
17· ·authorities which allow and encourage the
18· ·entities that operate its vehicle research
19· ·and development and design to work with
20· ·vehicle manufacturing companies to
21· ·manufacture vehicles cooperatively.· This
22· ·joint" --
23· · · ·A.· · I'm sorry, hold on.· Where are
24· ·you reading from?· I assume it's just the
25· ·next sentence, but for whatever reason I'm
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·1· · · · · · · ·DR. A. WERNER
·2· ·not seeing it.
·3· · · ·Q.· · It was just the next sentence
·4· ·after, it says, "These decisions are made
·5· ·based on two reasons" -- and then it says
·6· ·"First."
·7· · · · · · ·Do you see that?
·8· · · ·A.· · First, yeah, okay.· Yep.· Do you
·9· ·want me to just go to "Secondly"?
10· · · ·Q.· · Well, before we get to
11· ·"Secondly," the first reason listed there
12· ·designated first is the one you were
13· ·referring to in your declaration, right?
14· · · ·A.· · Yes, correct.
15· · · ·Q.· · This is the new government policy
16· ·that was introduced, right?
17· · · ·A.· · Correct.
18· · · ·Q.· · Okay.· So now you see where it
19· ·says "Secondly" in the earnings transcript?
20· · · ·A.· · I do.
21· · · ·Q.· · And it says, "Secondly, through
22· ·an efficiency perspective, we can leverage
23· ·the existing capacity of NIO's JAC plant
24· ·and enjoy the flexibility to expand the
25· ·capacity to support NIO's market
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·1· · · · · · · ·DR. A. WERNER
·2· ·penetration and growth plans for the next
·3· ·two or three years.· In the long run, we
·4· ·will still focus on the joint manufacturing
·5· ·model and continue improving the
·6· ·effectiveness of capital investments in
·7· ·manufacturing."
·8· · · · · · ·Do you see that?
·9· · · ·A.· · I do.
10· · · ·Q.· · Why did you omit that second
11· ·reason for terminating the plan from your
12· ·declaration?
13· · · ·A.· · I can't think of any specific
14· ·reason as I sit here today.
15· · · ·Q.· · Do you think it should have been
16· ·included?
17· · · ·A.· · Well, I mean, to the extent that
18· ·this thing doesn't have to be comprehensive
19· ·-- I mean, I'm just trying to determine
20· ·whether or not this aggregate information
21· ·with the stock price, right, for the
22· ·purposes of this report should it have been
23· ·included or not been included -- I don't
24· ·have an opinion one way or the other.
25· · · ·Q.· · Do you think --
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · Let me put it another way.
·3· ·Reading that second sentence doesn't alter
·4· ·my opinions with regards to market
·5· ·efficiency and damages in this case.
·6· · · ·Q.· · Do you think it was inaccurate to
·7· ·state that NIO explained the reason for the
·8· ·plan's termination when there were, in
·9· ·fact, multiple reasons?
10· · · ·A.· · I agree it should say "a" reason
11· ·and not "the" reason.
12· · · ·Q.· · I think we discussed earlier that
13· ·after the company's prepared remarks on the
14· ·earnings call there is often Q&A, right?
15· · · ·A.· · Correct.
16· · · ·Q.· · And that was the case for this
17· ·particular earnings call, right?
18· · · ·A.· · Yeah.· I don't remember that
19· ·we've actually spoken directly about this
20· ·topic, but generally that is the case.
21· · · ·Q.· · We had talked earlier that
22· ·securities analysts participated in
23· ·earnings calls by asking questions
24· ·sometimes.
25· · · · · · ·You recall that?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · I do recall that.
·3· · · ·Q.· · That's what I was referring to.
·4· · · · · · ·So anyway, here there were
·5· ·questions by the securities analysts during
·6· ·this call, right?
·7· · · ·A.· · That is correct.
·8· · · ·Q.· · And so if we go to page 6, that's
·9· ·where the question and answer session
10· ·begins.
11· · · · · · ·Do you see that towards the
12· ·bottom of page 6?
13· · · ·A.· · I do.
14· · · ·Q.· · And the first question there was
15· ·from Daniel Galves, G-A-L-V-E-S, from Wolfe
16· ·Research.
17· · · · · · ·Do you see that?
18· · · ·A.· · I do.
19· · · ·Q.· · And that was about the plan
20· ·government reduction in subsidies for
21· ·electric vehicles, right?
22· · · ·A.· · That is correct.
23· · · ·Q.· · All right.· Let's jump ahead to
24· ·the next question, which is on page 8 of
25· ·the transcript.· So if you go to page 8 and
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·1· · · · · · · ·DR. A. WERNER
·2· ·Shanghai facility was a negative surprise.
·3· · · · · · ·Can you show me where in this
·4· ·article they describe that announcement as
·5· ·a negative surprise?
·6· · · ·A.· · As I sit here today, I don't
·7· ·recall.· I think it may have had something
·8· ·to do with the deliveries, but I don't
·9· ·recall as I sit here today.
10· · · ·Q.· · Doctor, I'm not asking you for
11· ·your recollection.· You just read the
12· ·article.
13· · · · · · ·Does it describe the termination
14· ·of the plan to construct the Shanghai
15· ·facility as a negative surprise?
16· · · ·A.· · Well, they talk about lower
17· ·utilization.· I don't remember if at the
18· ·point when I wrote this I was thinking
19· ·there was a connection between the
20· ·non-construction of the factory and their
21· ·ability to produce more cars.
22· · · ·Q.· · Sitting here today, do you have
23· ·any basis to claim that there is such a
24· ·connection?
25· · · ·A.· · As I sit here today, no.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · Okay.· So just to be clear,
·3· ·nothing in this article actually says that
·4· ·the termination of the plan to construct
·5· ·the facility was a negative surprise?
·6· · · ·A.· · I mean, I think my answer speaks
·7· ·for itself.· I don't know if your summary
·8· ·is correct.
·9· · · ·Q.· · Well, I'm not trying to summarize
10· ·the document or your answer.· I'm just
11· ·asking the question.· Does this article say
12· ·that?
13· · · ·A.· · Yeah, I refer to my previous
14· ·answer about how I arrived at my opinion
15· ·regarding this.
16· · · ·Q.· · Well, this isn't an opinion.
17· ·This is a factual assertion about what was
18· ·said or wasn't said.
19· · · ·A.· · Okay.
20· · · ·Q.· · So does the article say that the
21· ·termination of the plan to construct the
22· ·Shanghai facility was a negative surprise?
23· · · ·A.· · Again, I can't, as I sit here
24· ·today, I don't recall if I made a
25· ·connection between those two things.· If
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·1· · · · · · · ·DR. A. WERNER
·2· ·you're asking about it as my reading today,
·3· ·and I think I stated this, the answer to
·4· ·your question is no.
·5· · · ·Q.· · Okay.· And then if we look at the
·6· ·next sentence in subparagraph D of your
·7· ·declaration, same sentence that was in
·8· ·paragraph 71 where you say that reactions
·9· ·from the market participants continued on
10· ·to the next trading day, right, and you
11· ·cite another article here?
12· · · ·A.· · I did.
13· · · ·Q.· · And this is from the Motley Fool?
14· · · ·A.· · It is.
15· · · ·Q.· · And are you familiar with that
16· ·publication, that website?
17· · · ·A.· · Yes, I am.
18· · · ·Q.· · Can you describe that website?
19· · · ·A.· · It's a website -- it's a website
20· ·that publishes opinions about stocks and
21· ·stock performance.
22· · · ·Q.· · Okay.· I just sent around that
23· ·article.· So let me know when it comes
24· ·through.· I'll send it in the chat as well.
25· ·This will be DX-26.
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·1· · · · · · · ·DR. A. WERNER
·2· · · · · · ·(Defendants' Exhibit 26, Article,
·3· · · ·"Why Shares of Chinese Electric Car
·4· · · ·Maker NIO Fell 47 Percent in March",
·5· · · ·remotely introduced and provided
·6· · · ·electronically to the reporter, as of
·7· · · ·this date.)
·8· · · ·Q.· · As always, Dr. Werner, just let
·9· ·me know when you get it and it's open.
10· · · ·A.· · Sure.
11· · · · · · ·Okay.
12· · · ·Q.· · So Defendants' Exhibit 26 is an
13· ·article from the Motley Fool titled, "Why
14· ·Shares of Chinese Electric Car Maker NIO
15· ·Fell 47 Percent in March."
16· · · · · · ·Do you see that?
17· · · ·A.· · I do.
18· · · ·Q.· · Do you recognize this article?
19· · · ·A.· · I do.
20· · · ·Q.· · You've reviewed it before?
21· · · ·A.· · At some point, yes.
22· · · ·Q.· · And this is the article that is
23· ·referenced in Footnote 74 of your report,
24· ·right?
25· · · ·A.· · That is correct.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · Now, this article is several
·3· ·pages long.· At the risk of drawing this
·4· ·out, I'd like you to read that article and
·5· ·point me to where it discusses the Shanghai
·6· ·facility.
·7· · · ·A.· · Before reading it, I can stop you
·8· ·right there.· When I was talking about this
·9· ·additional news, I wasn't specifically
10· ·referring to the Shanghai facility.· I was
11· ·referring to the conference call on the
12· ·earnings release.
13· · · ·Q.· · So when you say they continued,
14· ·you weren't talking about the reactions to
15· ·the termination of the plant to construct
16· ·the Shanghai facility from the prior
17· ·sentence in D, right?
18· · · ·A.· · Correct.· I was inarticulate. I
19· ·apologize.
20· · · ·Q.· · You were just referring broadly
21· ·to reactions to the quarterly press release
22· ·and conference call?
23· · · ·A.· · Correct.
24· · · ·Q.· · Okay.· All right.· Then you don't
25· ·have to read that.· You can put that one
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·1· · · · · · · ·DR. A. WERNER
·2· ·away.
·3· · · · · · ·Now, give me a minute.· We're
·4· ·going to look at a few documents and I'm
·5· ·just going to send them to you all at once
·6· ·to hopefully speed this up.
·7· · · · · · ·All right.· It just went through
·8· ·on my end.· Give it a minute and it should
·9· ·come through on yours.· It should be three
10· ·attachments?
11· · · · · · ·MR. SHI:· Should be how many
12· · · ·attachments?
13· · · · · · ·MR. GRIFFIN:· Three.
14· · · · · · ·This is going to be Exhibit 27
15· · · ·which is going to be labeled Tab 67 in
16· · · ·the e-mail that you receive.
17· · · · · · ·(Defendants' Exhibit 27, 3/6/19
18· · · ·analyst report from JPMorgan, remotely
19· · · ·introduced and provided electronically
20· · · ·to the reporter, as of this date.)
21· · · · · · ·MR. SHI:· Did you say Tab 6?
22· · · · · · ·MR. GRIFFIN:· Yes, it should be a
23· · · ·JP Morgan analyst report.
24· · · ·A.· · Okay, I've got it.
25· · · ·Q.· · Open that up.· Defendants'
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·1· · · · · · · ·DR. A. WERNER
·2· ·Exhibit 27 is an analyst report from
·3· ·JPMorgan dated March 6, 2019.
·4· · · · · · ·Dr. Werner, you've never seen
·5· ·this particular analyst report before, is
·6· ·that right?
·7· · · ·A.· · That is correct.
·8· · · ·Q.· · This is one of the reports
·9· ·following the alleged corrective disclosure
10· ·that you were not able to obtain, is that
11· ·right?
12· · · ·A.· · People at my direction were not
13· ·able to obtain it.
14· · · ·Q.· · I'll represent to you that this
15· ·is one of those analyst reports following
16· ·the alleged corrective disclosure on March
17· ·5th.
18· · · · · · ·So I'd like to direct your
19· ·attention to the first paragraph there that
20· ·starts "NIO's 2018 result."
21· · · · · · ·Do you see that?
22· · · ·A.· · I do.
23· · · ·Q.· · It says, "NIO's 2018 result was
24· ·broadly in line with expectations."· Then
25· ·there's a semicolon.
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·1· · · · · · · ·DR. A. WERNER
·2· · · · · · ·Do you see that?
·3· · · ·A.· · Why do I not see the semicolon.
·4· ·Maybe because I'm going blind.
·5· · · ·Q.· · It's small.· You might want to
·6· ·zoom in there.· It's the small print.
·7· · · ·A.· · After "profitability"?
·8· · · ·Q.· · No.· Why don't I throw this one
·9· ·up.· It may be easier for you to follow
10· ·along.
11· · · · · · ·All right.· Can you see this?
12· · · ·A.· · I can.
13· · · ·Q.· · Is it big enough?· It doesn't
14· ·look the same to me as it does to you, so
15· ·let me know.
16· · · ·A.· · It's plenty big.
17· · · ·Q.· · Good.· I'm just going to go ahead
18· ·and highlight the portion that I'm looking
19· ·at here.
20· · · · · · ·So it says, "NIO's 2018 result
21· ·was broadly in line with expectations; we
22· ·see two important developments per MGMT
23· ·guidance in 2019 that will lead to the
24· ·company's stock performance and
25· ·profitability:· 1, on the positive side,
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·1· · · · · · · ·DR. A. WERNER
·2· ·potential termination of building a new
·3· ·wholly owned Shanghai plant and simply
·4· ·leveraging JAC's existing capacity.· This
·5· ·implies cost savings and better investment
·6· ·returns."
·7· · · · · · ·Do you see that?
·8· · · ·A.· · I do.
·9· · · ·Q.· · So JPMorgan actually
10· ·characterized the termination of the
11· ·Shanghai facility as a positive event, is
12· ·that right?
13· · · ·A.· · In this sentence, yes.
14· · · ·Q.· · And then if we look down --
15· ·sorry, I started too early, there I just
16· ·want to scroll.
17· · · · · · ·If we scroll down here to the
18· ·first bullet, it again discusses the
19· ·Shanghai plants and it says, "On the
20· ·Shanghai plant, we welcome the move to
21· ·terminate the Greenfield expansion plan and
22· ·simply utilize/expand existing capacity at
23· ·JAC, subject to final regulatory approval
24· ·in June.· If it materializes, we believe
25· ·this will save Capex requirements by 20 to
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·1· · · · · · · ·DR. A. WERNER
·2· ·30 percent and drive better ROIC and cash
·3· ·flow."
·4· · · · · · ·Do you see that?
·5· · · ·A.· · I do.
·6· · · ·Q.· · But once again, JPMorgan is
·7· ·expressing a positive opinion of the
·8· ·announcement regarding the Shanghai plant,
·9· ·correct?
10· · · ·A.· · In this sentence, yes.
11· · · ·Q.· · And as you mentioned before, you
12· ·did not take into account this analyst
13· ·report in your event study because you
14· ·didn't have it, right?
15· · · ·A.· · That is correct.
16· · · ·Q.· · Would this have had any impact on
17· ·your analysis?
18· · · ·A.· · Well, again, to the extent that
19· ·I'm looking at market efficiency and not
20· ·loss causation or price impact, I don't
21· ·believe it would have any impact on my
22· ·conclusions.
23· · · ·Q.· · Does this suggest that the
24· ·information about the Shanghai plant was
25· ·countervailing news, positive news, as
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·1· · · · · · · ·DR. A. WERNER
·2· ·opposed to the negative news about the
·3· ·company's financial results and projections
·4· ·for demand?
·5· · · ·A.· · Just looking at these two
·6· ·statements without reading the entire
·7· ·report, it seems to suggest that they might
·8· ·be a positive impact on the company's stock
·9· ·price.
10· · · · · · ·But again, this is why I made
11· ·that distinction earlier when I was talking
12· ·about the choice of event studies for
13· ·marketed efficiency.· Generally you try to
14· ·use clean events, but to the extent you're
15· ·talking about corrective disclosures you
16· ·obviously can't just use clean events,
17· ·you've got to use the corrective
18· ·disclosures.
19· · · ·Q.· · Let's look at the next of those
20· ·analyst reports.· I'll send it in the chat.
21· ·We're going to mark this one as Defendants'
22· ·Exhibit 29, and I'll pull it up on the
23· ·screen since that seems to be easier for
24· ·you doctor but it's in your e-mail if you
25· ·want to open it up.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · This is Exhibit 7, right?
·3· · · ·Q.· · Tab 7 is going to be Defendants'
·4· ·Exhibit 28.
·5· · · ·A.· · This is the JPMorgan, or no?
·6· · · ·Q.· · This should be Morgan Stanley.
·7· · · · · · ·So again, I will share this with
·8· ·you so we are all on the same page.
·9· · · · · · ·(Defendants' Exhibit 28, 3/7/19
10· · · ·analyst report from JPMorgan, remotely
11· · · ·introduced and provided electronically
12· · · ·to the reporter, as of this date.)
13· · · ·Q.· · All right.· So we've marked as
14· ·Defendants' Exhibit 28 an analyst report
15· ·from Morgan Stanley dated March 7, 2019.
16· · · · · · ·Again, you do not recognize this
17· ·analyst report, right?
18· · · ·A.· · It is not something I reviewed
19· ·prior to seeing it now.
20· · · ·Q.· · Okay.· I'm going to zoom out here
21· ·slightly.· Can you still read what's over
22· ·here?
23· · · ·A.· · I'm looking at a Morgan Stanley
24· ·or JPMorgan -- let me focus on the screen
25· ·over here.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · Fair enough.
·3· · · · · · ·Tab 7, if you open it up on your
·4· ·own but you can also just look on the
·5· ·screen here.
·6· · · ·A.· · Right.
·7· · · ·Q.· · So midway through the page, I'll
·8· ·highlight it again for you, it talks about
·9· ·the Shanghai factors.
10· · · · · · ·Do you see that where I've
11· ·highlighted?
12· · · ·A.· · I do.
13· · · ·Q.· · It says, "NIO has suspended its
14· ·plan to build its own factory in Jia Ding,
15· ·Shanghai.· Recent government policy
16· ·encourages cooperation with JAC Motors.
17· ·NIO plans to stick with the cooperation
18· ·model for manufacturing and is open to
19· ·seeking other partners.· Its current
20· ·production base with JAC has 100K units of
21· ·annual capacity and would be expanded to
22· ·150K after upgrades satisfying the need for
23· ·its first three models in the next two to
24· ·three years.· NIO believes it might still
25· ·need to pay a small compensation to JAC in
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·1· · · · · · · ·DR. A. WERNER
·2· ·1H-19 with relatively low delivery period.
·3· ·We view the joint manufacturing mode as
·4· ·positive.· It could save on Capex while
·5· ·keeping sufficient capacity."
·6· · · · · · ·Do you see that?
·7· · · ·A.· · I do.
·8· · · ·Q.· · So like the JPMorgan analyst, the
·9· ·Morgan Stanley analyst also viewed the
10· ·termination of the Shanghai facility plant
11· ·as a positive, correct?
12· · · ·A.· · Well, again, without reading the
13· ·entire document, certainly that seems to be
14· ·the case with this particular sentence,
15· ·this particular paragraph.
16· · · ·Q.· · Fair enough.· In this particular
17· ·paragraph they expressly say it was a
18· ·positive, right?
19· · · ·A.· · Right.
20· · · ·Q.· · All right.· We can put that one
21· ·down.· We've got one more here for you.
22· ·It's in the chat now labeled Tab 8,
23· ·Defendants' Exhibit 29.
24· · · · · · ·(Defendants' Exhibit 29, 3/7/19
25· · · ·analyst report from Deutsche Bank
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·report, remotely introduced and
·3· · · ·provided electronically to the
·4· · · ·reporter, as of this date.)
·5· · · ·A.· · This is the Deutsche Bank report,
·6· ·correct?
·7· · · ·Q.· · Exactly.· I have don't have to
·8· ·share it if it's easier for you it look on
·9· ·your screen, but I'm happy to.
10· · · ·A.· · I think I'm okay.
11· · · ·Q.· · Okay.· Then I will stop doing
12· ·that.· So Defendants' Exhibit 29 is an
13· ·analyst report from Deutsche Bank that's
14· ·dated March 7, 2019.· You do not recognize
15· ·this document, right?
16· · · ·A.· · Correct, I have not seen this
17· ·document before.
18· · · ·Q.· · Okay.· I'd like to direct your
19· ·attention to the second paragraph on the
20· ·first page that's titled, "Sticking To
21· ·Joint Manufacturing Model Will Help Cash
22· ·Flow."
23· · · · · · ·Do you see that?
24· · · ·A.· · I do.
25· · · ·Q.· · Deutsche Bank writes, "In the
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·1· · · · · · · ·DR. A. WERNER
·2· ·results announcement, NIO said it will no
·3· ·longer seek to build its own manufacturing
·4· ·plant in Shanghai and will further rely on
·5· ·the joint manufacturing operation with Jing
·6· ·Wei.· Considering the successful ramp-up of
·7· ·ESH production in FY-18, we think that
·8· ·NIO's current production business model
·9· ·will not hinder the original sales outlook.
10· ·Indeed, we view this more flexible option
11· ·with potentially lower Capex outlay for the
12· ·company in the next few years."
13· · · · · · ·Do you see that?
14· · · ·A.· · I do.
15· · · ·Q.· · So, again, this paragraph seems
16· ·to indicate that Deutsche Bank viewed the
17· ·termination of the Shanghai facility plan
18· ·as a positive development, right?
19· · · ·A.· · Well, at a minimum, it's
20· ·expressing the opinion that it's not going
21· ·to pose an impediment to previous
22· ·estimates.
23· · · ·Q.· · And, in fact, it says that it
24· ·will be more flexible, will have lower
25· ·potential Capex, capital expenditure, and
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·1· · · · · · · ·DR. A. WERNER
·2· ·will help cash flow, right?
·3· · · ·A.· · That is what it says, yes,
·4· ·correct.
·5· · · ·Q.· · And all else being equal, those
·6· ·would generally be positive developments,
·7· ·right?
·8· · · ·A.· · Generally, for corporate -- I
·9· ·mean, I can't speak to this particular
10· ·example, but generally I think that could
11· ·be thought of as a positive.
12· · · ·Q.· · Okay.· You could put that one
13· ·down as well.
14· · · · · · ·Now, in addition to the Cammer
15· ·factors, you also analyzed the so-called
16· ·Unger/Krogman factors, correct?
17· · · ·A.· · Correct.
18· · · ·Q.· · U-N-G-E-R/K-R-O-G-M-A-N, correct?
19· · · ·A.· · Correct.
20· · · ·Q.· · What are the three Unger/Krogman
21· ·factors?
22· · · ·A.· · So it's bid/ask spread, the float
23· ·and market capitalization.
24· · · ·Q.· · And you indicated that -- or
25· ·strike that.
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·1· · · · · · · ·DR. A. WERNER
·2· · · · · · ·It's your opinion in this case
·3· ·that each of those factors supports a
·4· ·finding of market efficiency for NIO's ADS,
·5· ·correct?
·6· · · ·A.· · That is correct.
·7· · · ·Q.· · Are any one of those factors
·8· ·independently sufficient to establish
·9· ·market efficiency?
10· · · ·A.· · Independently sufficient?
11· · · ·Q.· · Correct.
12· · · ·A.· · So if I just -- if I knew nothing
13· ·about a company and I saw that it was big,
14· ·would that be sufficient to determine
15· ·market efficiency?
16· · · · · · ·MR. SHI:· Let me interpose an
17· · · ·objection.· Objection to the extent
18· · · ·that it calls for a legal conclusion.
19· · · · · · ·Go ahead.
20· · · ·A.· · Again, with all the caveats that
21· ·I gave before, that's not something -- I
22· ·mean, no one's actually ever asked me that
23· ·question.· In general, do I see large
24· ·corporations trading in efficient markets?
25· ·Yeah, generally.· But again, it's not
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·1· · · · · · · ·DR. A. WERNER
·2· · · · · · ·What is your understanding of an
·3· ·autocorrelation test in connection with
·4· ·assessing market efficiency?
·5· · · ·A.· · I would say it's something I've
·6· ·seen used before, but not in a long time.
·7· · · ·Q.· · But what is it?
·8· · · ·A.· · Well, it's basically asking the
·9· ·question if past stock price movements are
10· ·correlated with future stock price
11· ·movement.
12· · · ·Q.· · And how is that relevant to the
13· ·market efficiency assessment?
14· · · ·A.· · How is that relevant or
15· ·irrelevant?
16· · · ·Q.· · Either.
17· · · ·A.· · Which question do you want me to
18· ·answer?
19· · · ·Q.· · What effect, if any, does it have
20· ·on your opinion as to whether a market is
21· ·efficient?
22· · · ·A.· · Well, again, so we see cases
23· ·where stocks are efficient, but there is
24· ·autocorrelation between -- or
25· ·autocorrelation is found and often occurs
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·1· · · · · · · ·DR. A. WERNER
·2· ·when you have multiple days with large
·3· ·stock price movements.· That's generally
·4· ·why people stopped looking at
·5· ·autocorrelation coefficients in determining
·6· ·market efficiency.
·7· · · ·Q.· · Have you ever looked at
·8· ·autocorrelation to assess market
·9· ·efficiency?
10· · · ·A.· · Many years ago.
11· · · ·Q.· · And you did not conduct an
12· ·autocorrelation test in this case, right?
13· · · ·A.· · I did not.
14· · · ·Q.· · Why not?
15· · · ·A.· · For the reasons I just explained.
16· · · ·Q.· · Can you explain them again
17· ·specifically why you didn't apply that test
18· ·in this case?
19· · · ·A.· · Yeah, because autocorrelation is
20· ·not necessarily an indicator of
21· ·inefficiency.· And I'll refer back to the
22· ·other examples I gave you where a stock can
23· ·be efficient, but you'll have
24· ·autocorrelation.
25· · · ·Q.· · Do you have any idea if there was
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·1· · · · · · · ·DR. A. WERNER
·2· ·autocorrelation for NIO's ADS here?
·3· · · ·A.· · I do not.
·4· · · · · · ·MR. GRIFFIN:· All right.· I've
·5· · · ·got a bit more.· Do you want to take
·6· · · ·another break here?
·7· · · · · · ·THE WITNESS:· Sure.· Do you want
·8· · · ·to come back at, I guess, 5:05 your
·9· · · ·time?
10· · · · · · ·MR. GRIFFIN:· Yeah, that works.
11· · · · · · ·THE WITNESS:· All right.
12· · · · · · ·MR. GRIFFIN:· Great.· Thank you.
13· · · · · · ·THE VIDEOGRAPHER:· We are off the
14· · · ·record at 1:55 p.m.
15· · · · · · ·(Recess taken from 1:55 p.m. 2:10
16· · · ·p.m. PT)
17· · · · · · ·THE VIDEOGRAPHER:· We are back on
18· · · ·the record at 2:10 p.m.
19· ·BY MR. GRIFFIN:
20· · · ·Q.· · All right.· Dr. Werner, let's
21· ·turn to your second opinion.· You mentioned
22· ·that your second opinion in this case, and
23· ·I'm looking at paragraph 99 on page 37 of
24· ·your report, your second opinion was that,
25· ·"With expert assistance the finder of fact
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·1· · · · · · · ·DR. A. WERNER
·2· ·in this matter will be able to compute
·3· ·damages using a common class-wide
·4· ·methodology that applies to the calculation
·5· ·of damages for each and every class
·6· ·member."· Correct?
·7· · · ·A.· · I just got there, but it sounds
·8· ·like what I wrote.
·9· · · ·Q.· · And that is your opinion, right?
10· · · ·A.· · Well, okay.· Now that I have it
11· ·in front of me, why don't you reread it
12· ·so -- just to make sure we're on the same
13· ·page.
14· · · ·Q.· · Sure.· You say in paragraph 99,
15· ·"I also --"
16· · · ·A.· · Hold on.
17· · · ·Q.· · Page 37, not paragraph 37.· It's
18· ·the very end of your -- it's your
19· ·conclusions.
20· · · ·A.· · Okay, yes, yeah.
21· · · ·Q.· · So you list your second
22· ·conclusion in '99 as I also conclude that
23· ·with expert assistance the finder of fact
24· ·in this matter will be able to compute
25· ·damages using a common class-wide
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·1· · · · · · · ·DR. A. WERNER
·2· ·methodology that applies to the calculation
·3· ·of damages for each and every member --
·4· ·each and every class member, excuse me.
·5· ·Correct?
·6· · · ·A.· · Correct.
·7· · · ·Q.· · And that opinion applies to
·8· ·damages under Section 10b as well as
·9· ·Section 11, correct?
10· · · ·A.· · Correct.
11· · · ·Q.· · Now, if you turn to page 32, just
12· ·a few back, your analysis of class-wide
13· ·damages with respect to the 10b claim
14· ·starts in paragraph 91, correct?
15· · · ·A.· · That is correct.
16· · · ·Q.· · And you start by saying,
17· ·"Nonetheless, the methodology of financial
18· ·economists can employ to calculate
19· ·individual and class-wide damages stemming
20· ·from various alleged misrepresentations and
21· ·omissions will accommodate alternative
22· ·potential determinations of liability."
23· · · · · · ·Do you see that?
24· · · ·A.· · I do.
25· · · ·Q.· · What does "nonetheless" refer to
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·1· · · · · · · ·DR. A. WERNER
·2· ·at the start of that paragraph?
·3· · · ·A.· · Yeah, that's an excellent
·4· ·question.· That should probably not -- as I
·5· ·sit here today, I don't know.· Probably
·6· ·shouldn't be there.
·7· · · ·Q.· · Is this one of those paragraphs
·8· ·that you would copy from a prior report or
·9· ·declaration?
10· · · ·A.· · It's certainly similar to some of
11· ·the things that appeared in my previous
12· ·reports.
13· · · ·Q.· · Do you know, one way or another,
14· ·if you drafted this paragraph for this
15· ·declaration or copied it from a prior?
16· · · ·A.· · I don't.· I only say that because
17· ·of the word "nonetheless."· So no, I don't
18· ·know one way or the other.
19· · · ·Q.· · Okay.· What do you mean when you
20· ·reference alternative potential
21· ·determinations of liability here?
22· · · ·A.· · Well, I mean, I haven't looked
23· ·at -- fact discovery is still ongoing in
24· ·this case.· So, you know, if someone says
25· ·or the Court finds that 100 percent of the
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·1· · · · · · · ·DR. A. WERNER
·2· ·abnormal return is a result of the alleged
·3· ·fraud or 50 percent based on the
·4· ·information -- so that's -- I mean, I guess
·5· ·that's what I mean by alternative potential
·6· ·determination liability, the extent --
·7· ·among other things, the extent of the
·8· ·liability.
·9· · · ·Q.· · Okay.· And then if we look at --
10· ·same paragraph, but on the next page.· Do
11· ·you see the second line from the top begins
12· ·as such?
13· · · ·A.· · Yes.
14· · · ·Q.· · And you say, "Class-Wide damages
15· ·in response to the specific
16· ·misrepresentations and omissions ultimately
17· ·established by the Plaintiffs can be
18· ·calculated in a straightforward manner
19· ·common to all class members."· Correct?
20· · · ·A.· · That's a correct reading, yes.
21· · · ·Q.· · And it's your opinion that
22· ·calculating damages would be
23· ·straightforward in this case?
24· · · ·A.· · I believe there's a framework
25· ·that's commonly used in these types of
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · It's similar to the methodology
·3· ·that I've used in hundreds of cases to
·4· ·estimate damages in a securities class
·5· ·action.
·6· · · ·Q.· · Okay.· And you --
·7· · · ·A.· · I mean.
·8· · · ·Q.· · Go ahead.
·9· · · ·A.· · I mean, go to paragraph 92.· That
10· ·lays out what I believe is a
11· ·straightforward methodology in calculating
12· ·10b5 damages.
13· · · ·Q.· · Okay.· And so the first step of
14· ·this straightforward calculation is to
15· ·determine whether the alleged
16· ·misrepresentations and omissions had caused
17· ·the security price to be artificially
18· ·inflated, right?
19· · · ·A.· · Where are you reading from?
20· · · ·Q.· · Where you say first in little
21· ·Romanette 1 in paragraph 92.
22· · · ·A.· · Valuation tools, which would
23· ·include an event study analysis such as
24· ·that described herein, and potentially
25· ·other empirical analyses, if necessary,
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·1· · · · · · · ·DR. A. WERNER
·2· ·would be used to establish if the
·3· ·disclosures correcting the alleged
·4· ·misrepresentations and omissions caused the
·5· ·price of NIO's ADS to fall.
·6· · · ·Q.· · So step one is determining
·7· ·whether or not the disclosures correcting
·8· ·the alleged misrepresentations and
·9· ·omissions caused the price of NIO's ADS to
10· ·fall, correct?
11· · · ·A.· · Generally -- again, generally
12· ·that is true.
13· · · ·Q.· · And in order to do that, as you
14· ·note here, you would have to control for
15· ·potentially confounding non-fraud-related
16· ·information, right?
17· · · ·A.· · That is correct.
18· · · ·Q.· · How would you do that in this
19· ·case?
20· · · ·A.· · That's not something as of this
21· ·point in time I've been asked to do. I
22· ·mean certainly that's why you look at
23· ·things like -- that's why I include an
24· ·industry index, that's why I include a
25· ·market index.· So that's certainly one way,
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·1· · · · · · · ·DR. A. WERNER
·2· ·in general, that we do this type of thing.
·3· · · · · · ·But more specifically, that's not
·4· ·something I've been asked to opine upon or
·5· ·do at this point in time.
·6· · · ·Q.· · But this, generally, would
·7· ·involve disaggregating, you know, potential
·8· ·price impacts from various causes, right?
·9· · · ·A.· · That certainly could be one of
10· ·the things you might have to do.
11· · · ·Q.· · For example, you know, we
12· ·discussed earlier that the alleged
13· ·corrective disclosures here that press
14· ·release and earnings call contained a
15· ·variety of information that had nothing to
16· ·do with the Shanghai facility, correct?
17· · · ·A.· · I'm sorry, could you repeat the
18· ·question?
19· · · ·Q.· · Sure.· The two alleged corrective
20· ·disclosures that we discussed earlier in
21· ·this case are that press release and the
22· ·conference call in connection with the
23· ·fourth quarter full year 2018 earnings,
24· ·right?
25· · · ·A.· · I believe that's year.
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·Q.· · And as we discussed earlier, both
·3· ·of those documents -- or excuse me, the
·4· ·transcript for the call and the press
·5· ·release discussed a variety of topics and
·6· ·information in addition to the Shanghai
·7· ·facility, right?
·8· · · ·A.· · I believe that's accurate.
·9· · · ·Q.· · And Plaintiffs in this case don't
10· ·currently contend that any of that other
11· ·information not pertaining to the Shanghai
12· ·facility was a corrective disclosure,
13· ·right?
14· · · ·A.· · Again, for the purposes of this
15· ·market efficiency report and providing a
16· ·general damage methodology, that's not
17· ·anything I've thought about up until this
18· ·point.
19· · · ·Q.· · Given your familiarity with
20· ·Plaintiff's allegations in this case, you
21· ·don't know, sitting here right now, whether
22· ·they contend that any information in the
23· ·fourth quarter 2018 press release and
24· ·accompanying earnings call was a corrective
25· ·disclosure other than that regarding the
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·1· · · · · · · ·DR. A. WERNER
·2· ·What are you asking me about?
·3· · · ·Q.· · Have you reviewed Plaintiff's
·4· ·Motion for Class Certification?
·5· · · ·A.· · I refer to my previous answer and
·6· ·as of today, since the writing of this
·7· ·report, I don't know one way or the other.
·8· · · ·Q.· · You don't know if you have
·9· ·reviewed the motion for class certification
10· ·since you wrote your report?
11· · · ·A.· · That is correct.
12· · · ·Q.· · Okay.· The next category of
13· ·documents you list here are news articles
14· ·and press releases, right, in Exhibit 2 to
15· ·your declaration?
16· · · ·A.· · Correct.
17· · · ·Q.· · And this references 494 articles
18· ·from September 12, 2018 to March 5, 2020,
19· ·correct?
20· · · ·A.· · That is correct.
21· · · ·Q.· · That's a broader date range than
22· ·the relevant period, right?
23· · · ·A.· · That is correct.
24· · · ·Q.· · And why did you use that
25· ·particular time period?
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·A.· · Well, typically regardless of
·3· ·what period or relevant period I'm looking
·4· ·at, I'll look at all articles,
·5· ·documentation from the beginning of the
·6· ·class period to the end of the class
·7· ·period.
·8· · · · · · ·So I guess the easier way to put
·9· ·it is what I commonly do.
10· · · ·Q.· · Why you stop at March 5, 2020?
11· · · ·A.· · If I remember correctly -- hold
12· ·on one second, that's typically what I
13· ·would do in this type of case.
14· · · ·Q.· · You would always stop on March 5,
15· ·2020?
16· · · ·A.· · No.
17· · · ·Q.· · Sorry.· When you say this is what
18· ·you would typically do, what did you mean
19· ·by that?
20· · · ·A.· · Well, typically, I'd go out a
21· ·year out from the end of the class period
22· ·in doing my news article search.
23· · · ·Q.· · Okay, I understand.
24· · · · · · ·Then, in the second bullet point
25· ·you reference a particular Bloomberg news
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·1· · · · · · · ·DR. A. WERNER
·2· ·article.· That's the article that we looked
·3· ·at earlier today, right?
·4· · · ·A.· · That is correct.
·5· · · ·Q.· · Why did you list that particular
·6· ·article by name here and no others?
·7· · · ·A.· · Because I referenced it in the
·8· ·report.
·9· · · ·Q.· · You referenced other articles
10· ·directly in the report as well, right?
11· · · ·A.· · I believe so.· Okay, so maybe the
12· ·more accurate -- I don't recall as I sit
13· ·here today.
14· · · ·Q.· · Okay.· And then you list all of
15· ·the analyst reports that you reviewed,
16· ·which we discussed earlier, right?
17· · · ·A.· · Correct.
18· · · ·Q.· · And then you list SEC filings
19· ·from NIO that you reviewed, right?
20· · · ·A.· · Correct.
21· · · ·Q.· · The Form 6K from March 6, 2019
22· ·that we reviewed earlier is not in this
23· ·list, is that right?
24· · · ·A.· · Let's see.· I don't see it, which
25· ·is why I always include this other category
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·1· · · · · · · ·DR. A. WERNER
·2· ·at the end of this exhibit, which says
·3· ·other documents cited in my report.· So
·4· ·obviously I've cited to that in my report.
·5· ·So it's something that I considered.
·6· · · ·Q.· · So it was just an oversight to
·7· ·not list it specifically in the SEC filings
·8· ·list?
·9· · · ·A.· · Correct.
10· · · ·Q.· · Okay.· Can you turn back to page
11· ·2 of your declaration?
12· · · ·A.· · I'm sorry, page 2, correct?
13· · · ·Q.· · Page 2, correct, paragraph 7,
14· ·bottom of the page, talking about your
15· ·comp.
16· · · ·A.· · Okay.
17· · · ·Q.· · You write that, "Crowninshield is
18· ·currently being compensated at $675 per
19· ·hour for my ongoing work on this matter."
20· ·Correct?
21· · · ·A.· · Correct.
22· · · ·Q.· · How much are you being
23· ·compensated for your work on this matter?
24· · · ·A.· · Based on that rate I think it's
25· ·around 82 percent of that rate.· I don't
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·1· · · · · · · ·DR. A. WERNER
·2· ·know the exact proportion.
·3· · · ·Q.· · Why did you list what
·4· ·Crowninshield is being compensated as
·5· ·opposed to what your being compensated?
·6· · · ·A.· · What I commonly do.
·7· · · ·Q.· · Did anyone instruct you to do
·8· ·that?
·9· · · ·A.· · Fifteen years ago did someone
10· ·instruct me to do that?· I don't recall.
11· · · ·Q.· · No one instructed you to do that?
12· · · ·A.· · I'm sorry, what?
13· · · ·Q.· · No one instructed you in this
14· ·case specifically to list Crowninshield's
15· ·compensation as opposed to your own, right?
16· · · ·A.· · That is correct.
17· · · ·Q.· · Okay.· And then you reference
18· ·additional Crowninshield consultants.· Is
19· ·that the three individuals we discussed
20· ·earlier?
21· · · ·A.· · It is.
22· · · ·Q.· · Okay.· Do you know how much
23· ·Crowninshield has been paid to date in
24· ·connection with this matter?
25· · · ·A.· · I do not.
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·1· · · · · ·DR. A. WERNER
·2· ·that okay with you?
·3· · · · ·MR. GRIFFIN:· Yeah, whatever
·4· ·works for you.· Whatever you need to
·5· ·do, that's fine.
·6· · · · ·THE WITNESS:· Okay.· All right.
·7· · · · ·MR. GRIFFIN:· Thank you.
·8· · · · ·THE VIDEOGRAPHER:· We are off the
·9· ·record at 3:03 p.m.
10· · · · ·(Recess taken from 3:03 p.m. to
11· ·3:13 p.m. PT)
12· · · · ·THE VIDEOGRAPHER:· We are back on
13· ·the record at 3:13 p.m.
14· · · · ·MR. GRIFFIN:· We have no further
15· ·questions at this time.
16· · · · ·MR. SHI:· Okay.· So let us -- let
17· ·me caucus with folks on my side for a
18· ·bit and let's -- can you guys hear me?
19· · · · ·MR. GRIFFIN:· Yes.
20· · · · ·MR. SHI:· Yeah.· So give us five
21· ·minutes or so and we'll be back.
22· · · · ·MR. GRIFFIN:· Okay.
23· · · · ·THE VIDEOGRAPHER:· One moment.
24· ·We are off the record at 3:13 p.m.
25· · · · ·(Recess taken from 3:13 p.m. to
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·1· · · · · · · ·DR. A. WERNER
·2· · · ·3:19 p.m. PT)
·3· · · · · · ·THE VIDEOGRAPHER:· We are back on
·4· · · ·the record at 3:19 p.m.
·5· ·EXAMINATION BY
·6· ·MR. SHI:
·7· · · ·Q.· · Dr. Werner, I believe earlier
·8· ·today you testified that NIO sells cars in
·9· ·the U.S?
10· · · · · · ·Do you remember that?
11· · · ·A.· · I do believe I said that, yes. I
12· ·should have said my understanding is they
13· ·intend to sell cars in the U.S.
14· · · · · · ·MR. SHI:· Okay.· We have no
15· · · ·further questions.
16· ·FURTHER EXAMINATION
17· ·BY MR. GRIFFIN:
18· · · ·Q.· · Very briefly, Dr. Werner, it's
19· ·your understanding that NIO did not sell
20· ·any cars in the U.S. during the relevant
21· ·period, is that right?
22· · · ·A.· · That is correct.
23· · · ·Q.· · Does that change at all your
24· ·opinion as to whether the S&P 500
25· ·Automobile Manufacturers Index was an
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 287
YVer1f
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·1· · · · · · · ·DR. A. WERNER
·2· ·appropriate industry index in this case?
·3· · · ·A.· · It does not.
·4· · · · · · ·MR. GRIFFIN:· Okay.· We have
·5· · · ·nothing further.
·6· · · · · · ·MR. SHI:· We don't have anything
·7· · · ·further either.
·8· · · · · · ·THE VIDEOGRAPHER:· Okay.· This
·9· · · ·concludes the video deposition of Adam
10· · · ·Werner.· Going off the record at 3:20
11· · · ·p.m. Pacific Time.
12· · · · · · ·(Time noted:· 3:20 p.m. PT)
13
14
15· · · · · · · · · · · ·____________________
16· · · · · · · · · · · · ·DR. ADAM WERNER
17
18· ·Subscribed and sworn to before me
19· ·this ___ day of __________, 2022.
20
21· ·_________________________________
22
23
24
25
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 288
Case 1:19-cv-01424-NGG-JRC Document 121-21 Filed 12/23/22 Page 109 of 110 PageID #:
3011
Case 1:21-md-02989-CMA Document 566-26 Entered on FLSD Docket 06/07/2023 Page 112
of 113
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·1
·2· · · · · · · C E R T I F I C A T E
·3· ·STATE OF NEW YORK· · )
·4· · · · · · · · · · · · : ss.
·5· ·COUNTY OF NEW YORK· ·)
·6
·7· · · · · · ·I, Joan Ferrara, a Notary Public
·8· · · ·within and for the State of New York,
·9· · · ·do hereby certify:
10· · · · · · ·That DR. ADAM WERNER, the witness
11· · · ·whose deposition is hereinbefore set
12· · · ·forth, was duly sworn by me and that
13· · · ·such deposition was taken remotely and
14· · · ·is a true record of the testimony given
15· · · ·by the witness.
16· · · · · · ·I further certify that I am not
17· · · ·related to any of the parties to this
18· · · ·action by blood or marriage, and that I
19· · · ·am in no way interested in the outcome
20· · · ·of this matter.
21· · · · · · ·IN WITNESS WHEREOF, I have
22· · · ·hereunto set my hand this 13th day of
23· · · ·September, 2022.
24· · · · · · · · · · · _____________________
25· · · · · · · · · · · · · · Joan Ferrara
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
www.LexitasLegal.com/Premier
Lexitas
In Re: NIO Inc. Securities Litigation
Dr. Adam Werner
September 13, 2022
www.LexitasLegal.com/Premier
Lexitas
888-267-1200 Page 289
Case 1:19-cv-01424-NGG-JRC Document 121-21 Filed 12/23/22 Page 110 of 110 PageID #:
3012
Case 1:21-md-02989-CMA Document 566-26 Entered on FLSD Docket 06/07/2023 Page 113
of 113