Hesai Group ( HSAI ) shares are trading lower in the premarket session on Wednesday following allegations made by short seller Blue Orca Capital yesterday.

Today, in response to a report by Blue Orca, Hesai ( HSAI ) strongly denied the accusations. “The Company strongly disagrees with the allegations in the report and believes that the report is without merit,” Hesai ( HSAI ) said in a statement.

Blue Orca Capital called Hesai ( HSAI ) a “Chinese scam” and accused the company of falsely denying involvement with the Chinese military, citing evidence suggesting that Hesai’s lidar technology is used on military vehicles.

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The short seller also pointed out that the U.S. Department of Defense had labeled Hesai ( HSAI ) as a Chinese military company last year.

Additionally, Blue Orca raised concerns about Hesai’s financials, alleging that the company’s reported profitability last year was the result of a $20 million break-up fee from its largest customer, which had not been disclosed to investors.

The report also claimed that Hesai ( HSAI ) might be laying off up to 30% of its workforce.

This controversy follows a significant stock surge last week after Hesai ( HSAI ) announced a multi-year deal with Mercedes-Benz to supply lidar sensors. Meanwhile, Blue Orca expressed skepticism about the deal, noting that Mercedes had not publicly confirmed it and drawing attention to stock sales by Hesai ( HSAI ) executives following the price spike.

According to Benzinga Pro, HASI stock has lost over 10% in the past five days. The stock gained over 300% over the past year.

Investors can gain exposure to the stock via SPDR S&P Kensho Smart Mobility ETF ( HAIL ) and SPDR FactSet Innovative Technology ETF ( XITK ) .

Price Action: HSAI shares are trading lower by 3.45% to $19.85 premarket at last check Wednesday.

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