Short salesman Muddy Waters is targeting the Chinese company KE Holdings By Reuters

By Ashwini Raj and Echo Wang

(Reuters) -Muddy Waters (NYSE 🙂 U.S. short-selling firm on Thursday said KE Holdings Inc., one of China’s largest housing brokers, had acquired a short position and traded its shares ahead of 10.9%.

KE stocks fell most of their previous losses and fell by about 2% in morning trading.

The short seller questioned the value of the company’s transaction volumes, the number of stores and the number of agents, as well as the company’s revenue.

KE did not immediately respond to Reuters’ requests for comment.

Muddy Waters wrote in a research note https://d.muddywatersresearch.com/content/uploads/2021/12/MW_BEKE_12162021.pdf KE Holdings inflated new home sales and commission revenue, and ghost stores as “assets” listed them. it also overshadowed the value of the platform and some assets purchased.

“Similar Luckin coffee (OTC :), this is a real business with a lot of scams, ”said Muddy Waters, who compared Starbucks (NASDAQ 🙂 to a Chinese rival, falsely inflating its share price by falsifying its revenue.

According to Muddy Waters, the company inflated new home sales by more than 126% GTV (Gross Transaction Value) and commission revenue by about 77% -96%, while operating less brokerage than its platform figure shows.

The Beijing-based KE, backed by Tencent Holdings (OTC 🙂 and SoftBank Group Corp., raised $ 2.1 billion in the New York IPO last year, making it the second-largest U.S. listing of a Chinese company.

KE provides an online and offline platform in China for housing transactions and services. It is one of the so-called “platform” companies that control large amounts of data, and Beijing is now undergoing unprecedented regulatory repression.

Earlier this year, Reuters reported that KE Holdings was planning a listing of the Hong Kong stock exchange and had hired Goldman Sachs (NYSE 🙂 to run a float. However, the company denied the report, saying it had no immediate plans.

U.S. regulators have tightened their grip on China’s IPO expectations in the U.S. this year. The U.S. Securities and Exchange Commission (SEC) has launched a series of new disclosure requirements following the short-lived New York debut of Chinese travel giant Didi this summer.[L1N2PU1GE]

The development underscores the concern of U.S. policymakers that Chinese companies are systematically violating U.S. rules by requiring public companies to inform investors of a range of potential risks to their financial performance.