After Luckin, iQiyi was "shorted" again. What is the origin of the muddy water research behind it!
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#Taking history as a mirror
6
△Hollis, a person with a unique pursuit of Coding△ 
This is Hollis’s 261st original sharing
author l Hollis
source l Hollis (ID: hollischuang)
Recently, Ruixing's share price plummeted due to the exposure of a series of negative information such as financial fraud, which unanimously caused Ruixing to announce the suspension of trading multiple times before obtaining temporary peace.
But one wave has not settled, another wave has risen.
On April 7th, U.S. time, the U.S. short-selling agency Muddy Water and Wolfpack Research jointly issued a report stating that iQiyi had been fraudulent before it went public in 2018 and has continued to commit fraud since then. It is estimated that last year's revenue will be exaggerated by about 8 to 13 billion yuan, accounting for about 27% to 44% of the financial report revenue, and the number of users will be exaggerated by 42% to 60%.
As soon as the news came out, iQiyi's share price fell nearly 10% that day.
It’s interesting to note that the title of this report is "The Netflix of China? "Good Luckin", Luckin is mentioned in the title, to satirize Luckin Coffee, which was shorted by muddy water shortly before.
Behind these incidents, short-selling institutions led by Muddy Waters have contributed to the flames. So what is the Muddy Water Company? How do short sellers make money? And how to go short?
1
How muddy water fishing in troubled waters
Muddy Water Research is a short-selling company in the United States. The founder of Muddy Water Company is Carson Bullock. He started Muddy Water Research because it started in China.
At the earliest, Bullock was commissioned by his father as a Wall Street investor. I came to China to investigate Oriental Paper, but to the great surprise of Brock, "Dongfang Paper has serious "data fraud" that is not worth the investment.
So Bullock reported to his father, and his father, as a long investor, gave up the investment.
But Bullock couldn't stop thinking about the report he had done so hard, and was not reconciled, so Bullock created his own company, and by publishing a 30-page report, Dongfang Paper went bankrupt in a flash.
The bankruptcy of Oriental Paper just made the Muddy Water Company an instant hit. At this time, professional short-selling companies asked for cooperation.
Thus, a professional short-selling company was born. Their basic steps for short stocks are roughly as follows:
1. Muddy Waters Research is responsible for investigating the potential stocks
2. A professional short-selling company that cooperates with Muddy Waters conducts securities lending to the short-selling target company
3. Muddy Waters issues an investigation report
4. The short-selling company conducts short-selling
5. The final profit sharing between both parties
There are a lot of financial terms mentioned here, which sounds very complicated, but in fact, everyone understands it simply:
That is, the borrowed stock is sold at the present value, waiting for the price to fall, and then the stock is bought back at a low price to return it, and the difference is realized.
In fact, generally speaking, there are roughly three reasons for shorting a company’s stock. The first is the company’s financial fraud, the second is the deterioration of fundamentals, and the third is obviously too high a valuation.
And Ruixing was shorted because of Ruixing's financial fraud. On January 31, Muddy Water issued a document saying that it had received an 89-page report on Ruixing's financial fraud.
The report not only pointed out that Luckin fabricated financial data, but also inflated sales and exaggerated marketing expenses. In fact, before this war, Muddy Water's ambush on Ruixing had been buried three months ago.
And Muddy Waters said that Luckin Coffee’s listing is nothing more than a bad business model of deep discounts and free gifts to cultivate the consumption habits of Chinese consumers. The company has begun to fabricate financial and operational data since the third quarter of last year. Luckin Coffee is an outright scam that uses wonderful stories to manipulate and maximize investor confidence.
This is a head start for Ruixing Development. Even Ruixing Coffee stocks trigger 3 fusing within 20 minutes.
2 The
record of muddy water
If you can summarize Muddy Water's record in one sentence, then it is 10 years since its establishment and shorted 18 Chinese concept stocks, and the short-selling Chinese concept stocks of Muddy Waters have a good reputation.
There are roughly three trends for companies that are shorted by muddy waters: or short-term stock price fluctuations, or privatization and delisting, returning to A shares, or directly suspending trading. On the whole, most of the stocks that have plummeted quickly after being shorted by muddy waters, and 6 of them have already been delisted.
For so many years, Muddy Waters has basically never failed in doing aerial stocks. Many Chinese concept stock companies have issued a statement to sue, but so far there is no news of winning the lawsuit and losing compensation in Muddy Waters.
However, short-selling in muddy water is not an "empty glove white wolf" as many people think. On the one hand, short-selling may fail. On the other hand, even if it succeeds, it requires a lot of manpower and material resources.
Generally speaking, it takes at least half a year or even more than a year for only investigating a company in Muddy Waters.
It is said that Muddy Waters shorted a Chinese concept stock company and hired someone to stay at the gate of this company for half a year to secretly observe the number of trucks in and out and the loading capacity, and to see whether the production is normal. It was found that there were few trucks in and out. Based on this clue, it was judged that this production company absolutely had the problem of false information disclosure. Finally succeeded in shorting.
The method of shorting Luckin this time is the same.
3
Ruixing apologizes, iQiyi denies
Integrity management is the basic criterion of an enterprise. Data fraud is undoubtedly driving itself to a dead end. Although Ruixing is listed overseas, according to the spirit of the new "Securities Law" implemented since March 1, Ruixing may also be in the country. Receive legal accountability.
And as the negative news about Ruixing continues to ferment, Ruixing's prospects are worrying. Some lawyers said that Ruixing might face huge compensation from all victims.
However, in addition to Luckin's senior executives on April 5, Luckin released the "Apology Statement" through the official Weibo, and still did not forget to cheer himself up on the table. 
And Luckin Coffee Chairman Lu Zhengyao also posted an apology in the circle of friends. have to say. Luckin has run too fast in the past two years and lacks the necessary orderliness, causing many problems.
Anyway, one thing is certain is that this fraudulent storm exposed by muddy water is undoubtedly a huge blow to Ruixing.
To this day, Luckin has not cancelled the coffee subsidy at this critical moment. It has to be said that Ruixing Cheng also "subsidies", but also "subsidies" when it fails. Lucky wool was once considered a magic weapon by Ruixing, but it does not seem to have any effect until now.
On the other side, iQiyi, which is currently on the cusp, denied the allegations.
In the face of allegations, iQiyi believes that the data and conclusions cited in the report are seriously inaccurate and inconsistent with the actual situation. As a responsible listed company, all financial and operating data disclosed are true and meet the requirements of the SEC (United States Securities Regulatory Commission). Resolutely deny all false allegations and reserve the right to prosecute.
In response to iQiyi being shorted, Gong Yu, CEO of iQiyi, responded to the circle of friends: evil does not suppress the righteousness, and see who wins in the end.
Where will Luckin and iQiyi go in the future? Will they survive like most institutions shorted by muddy water? We don't know this, and we can only help them luck.
Some people think that the practice of muddy water is a bit despicable, and some people think that companies that falsify are shameless. So, what do you think of this matter?
Reference:
"The skin of muddy water makes people so speechless"
"The companies that have been shorted by muddy water have 6 delisted. Will Ruixing have a future"
"The Netflix of China? Good Luckin
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