Muddy Waters Research

Obviously, this is a new startup and they were losing money.

For example, in Q3, 2019 they had losses of about 73 million dollars obviously because they were spending so much money on sales and marketing as well as offering deep discounts and their products so they were turning a huge loss at the end by toward the end of 2019 Now we take a look at the events that unfolded in 2020 and this began in January of 2020 with a famous short seller by the name of Muddy Waters Research that published an article saying that they received an anonymous tip that told them that Luckin Coffee basically is a fraud and that all the sales numbers are fabricated and made up.

And immediately after that article came out, Luckin Coffee came out and denied these allegations very strongly.

And then a couple of months went by.

Impersonated Twitter accounts aren't anything particularly new.

Way back in 2013, this account posing as the Muddy Waters research firm made a series of tweets that claimed a company named Audience Incorporated was under federal investigation.

The company's stock price collapsed from $12.35 to $8.87 as the fake account was posting, a 28% drop, which was so violent it triggered the exchange's circuit breaker and halted trading.

The reason traders reacted so strongly to these fake tweets is because Muddy Waters is a very prominent short selling firm.

They put out research on companies they're confident will decline, and this fake Twitter account looked somewhat like the real one if you weren't looking too closely.

The man behind the account was James Alan Craig.

And from there, kind of discovered some of these short sellers that were busting a lot of US-listed China-based frauds.

So you had people like Muddy Waters and Geo Investing first starting to release these reports on companies that were demonstrable frauds, China-based companies that were listing in the US.

You had, you know, uh, Sino-Forest, you had Longwei Petroleum, uh, companies that, you know, were worth zero but were getting $100 million, billion-dollar valuations on US equity markets.

And as an English major and an investigative, you know, journalist kind of, uh, uh, enthusiast, those reports really I found fascinating.

And so really got way more of an understanding as to how things worked.

And from there, while I was up there, uh, working for that company, which ultimately wound up going under, I started to read critical reports by short sellers, namely GeoInvesting, Muddy Waters, uh, Carousel, all these people that were publishing on US-listed China-based, uh, reverse takeover scams.

And I could not believe that these things were trading.

I could not believe that the numbers were just made up, and not just the numbers, but the narratives.