January 31, 2020 Eastern Time, muddy waters ( Muddy Waters LLC ) Coffee ( NASDAQ: LK ) fortune .
A “raid” by a short-selling agency in the United States is the “standard configuration” of the star Zhonggui Company, New Oriental, Good Future, Focus Media, Qihoo 360, Vipshop, Jingdong, Momo, Pinduoduo …
The timing of this muddy water selection can be described as poisonous—the epidemic is severe, Chinese catering has been hit hard, Haidilao and Xibei have ceased business, and the capital market ’s confidence in listed restaurants and entertainment companies is extremely fragile. Muddy Heart of touching the fish in the muddy water and looting in the fire is clear.
On the day the muddy waters report was released, Ruixing coffee plate closed down more than 20%, and the closing drop narrowed to 10.74%.
Before the market opens on February 3rd, EST, Rui Xing Coffee issued a public response , which denied all the allegations in the Muddy Water Report one by one and said” Anonymous reports are intentionally misleading and false allegations. “According to Rui Xing’s response, the possibility of prosecution for malicious charges in muddy waters is very high.
The methodology of the Report is flawed, the evidence is unsubstantiated, and the allegations are unsupported speculations and malicious interpretations of events. The Report also attacks members of Luckin Coffee’s management team, shareholders, and business partners and its claims are either false, misleading or entirely irrelevant. Furthermore, Luckin Coffee believes that the Report demonstrates a fundamental misunderstanding of the Company’s business model and operating environment. Luckin Coffee intends to take appropriate actions to defend itself against these malicious allegations and to protect the interests of its shareholders.
Public companies are well-intentioned by the public, and any organization or individual can question them by their real names. Muddy Waters issued an “anonymous report received”, apparently a guilty conscience.
Anonymity greatly reduces the credibility and seriousness of muddy water reports. Regardless of media, investment research institutionsEnterprises and institutions, as long as they are formal and responsible, will not use anonymous reports to attack other institutions or individuals.
Rui Xing said in response to the media that “there will be recourse to malicious charges in muddy water.”
How does “muddy water” touch a fish
Munnel water, fragrant water ( Citron ) and other short-selling “small institutions” are “asset-light” leather bag companies. Unintentional and incapable of building a high-quality investment banking team, unable to connect with decent investment banking business, and survived by sharing the plunge in share prices with hedge funds. The way and path of sharing may be very secretive and difficult to verify, but “no profit is not too early” is general knowledge. What is the effort to take the risk and take the risk of a lawsuit to short the report chart?
The muddy waters’ routine is very “rough”: while collaborating hedge funds establish short positions, while making short reports and waiting for release, the stock price plummets.
The success of “Music in the Water” depends on three factors:
1) U.S. investors lack understanding or confidence in China General;
2) Most of the time the power of fear is greater than greed;
3) Careful selection of release timing, such as the outbreak in China.
The muddy waters choose their targets very carefully:
First, aiming at star companies, the stock price has risen well in the past year and a half, so that there is room for short selling;
Second, the plate is relatively small and the stock price is volatile. The market value ranges from several billion dollars to as much as one to two billion dollars. Shorting is usually done by “borrowing stock.” For example, when the stock price is $ 45, borrow 5 million shares of Ruixing Coffee and clear it at an average price of $ 40. If you can cut the stock price and buy it back at $ 20 per share, you can earn $ 100 million after you return the stock. But there is a lot of interest to pay. Regardless of the price, short sellers within the agreed period must purchase and return these 5 million shares. If Ruixing only drops to $ 35, the short spreads earned may not be enough to pay interest. If Ruixing gains $ 50, the bears will lose at least $ 50 million.
The third is that the listing time is short and the capital market has not given enough weight.And the relatively small plate, top analysts have no time to take care of it. The analysts who study Apple and the analysts who study Ruixing Coffee are not in the same grade in terms of quantity and quality. Singing Apple has to fight against many analysts, and nonsense will be instantly returned to its original shape. When singing Sing Kong Ruixing Coffee, the opponent is much weaker.
Blood-thirsty shorts are also “knife licking blood”, borrowing stocks is betting against longs, and the success rate is only about 50%. The short report is shot at the long “poison dart”, so it is common practice to take a lawsuit and lose a lawsuit. The group that shorted Vipshop was beaten up to find their teeth, and they were ridiculed by the VIP executives. “> (Note: several short-successful attempts, the stock price of Vipshop will rise from less than 5 dollars to more than 200 dollars) .
The bears are not kind people, but they are the “pecker” of the capital market and an indispensable role in the “ecological circle”. Outstanding short companies are an opportunity to gain a deep understanding of the capital market, and dealing with short positions is a “compulsory course”.
The reaction of “Taoyou” was expected
The anonymous report of Sing Kong Ruixing Coffee was sent to multiple institutions at the same time, such as the citron with the muddy water. The latter’s tweet, which was released immediately, was concise and expressed three meanings:
1. Sajia also received the report;
2. Relevant business data, application downloads and telephone interviews with competitors support Ruixing’s financial report data;
3. Respect the muddy water, but this anonymous report is inaccurate.
Xiangxi will certainly not publish the report.
The premise of a short report is “deep cooperation” with a hedge fund and the latter has established a short position. Xiang Ye made this report to make wedding dresses for others.
It’s like a company that has spent a lot of money in a media company to “hard-broadcast”, and also sent the “pass draft” to 100 other media. Which one will send it? # 发 了 也 白发 #
Furthermore, Xiangxi is not a media company and does not earn a “channel fee”. He is not short because he is not sure.
According to the profit principle of short institutions-whoever benefits and who publishes it, the beneficiary of this short Ruixing Coffee report is muddy water. Anonymity and distribution to multiple institutions are “security measures”.
Misleading investors with “unsampling surveys”
The first impression of the report released by Muddy Waters is that there is no less effort. The report author claims that “using 92 full-time and 1,418 part-time investigators, collected nearly 26,000 small tickets, performed 11,000 hours of store video, and collected a large number of internal WeChat chat records.”
In the past, the short-selling reports of leather bag companies were mainly to “find faults” from the financial reports. On-site research, interviews with customers and suppliers collected information in accordance with preset positions, and they were enough.
Using the “heavy physical work” of 1500 full-time and part-time personnel, the short and short institutions have not done it before. If you don’t get a large upfront payment, the bag company is too risky.
Short selling Apple with a market value of US $ 1.4 trillion is worth thousands of people. The market value of Ruixing Coffee is only US $ 10 billion. The muddy water “excessively hard” does not rule out other motivations.
The muddy water report The biggest problem is precisely the expensive investigation.
Ruixing Coffee has more than 4,500 stores in mainland China. The short report tracked 981, which is a sample survey.
The main conclusions of this sample survey are:
The number of purchases per order dropped from 1.38 in Q2 to 1.14 in Q4;
The average price of each item is 1.23 yuan lower than the number announced by Ruixing;
“Other products ( Light food, fruit juice, nuts, markCups, etc. ) accounted for 6.2% of sales “…
Sampling surveys are divided into “statistical sampling” and “non-statistical sampling.” At the same time, the two requirements of “randomly selecting samples” and “evaluating the data obtained by sampling using probability theory” are statistical sampling.
The short report “covered 981 stores in 38 cities (