On the last day of January 2020, Muddy Waters Research, affiliated to serial short-seller Muddy Waters Capital LLC, came under the spotlight, after publishing a report on Twitter claiming that Chinese company and Starbucks’ competitor Luckin Coffee had posted false and misleading financial and operating figures. After only three months, this action resulted in an internal investigation finding Luckin Coffee’s COO responsible for manipulating revenue figures, the start of a formal investigation for fraud by the China Securities Regulatory Commission, and about 76% free fall of Luckin Coffee’s share price.
After Luckin Coffee, few new shorts and related reports by Muddy Waters have followed. The analysis starts by introducing the activity of Muddy Waters, also citing other companies acting similarly (e.g., Wolfpack Research, with a current short on the “Chinese Netflix” iQiyi). Then, there will be an occasion to allow for a brief recap of Luckin Coffee's story and other past examples of successful fraud discoveries. The analysis will later focus on the last company shorted by Muddy Waters, namely eHealth, by doing an “analysis of an analysis,” showing the main reasons behind the short recommendation and clarifying our observations and comments.
For the full report see the link below!
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