Last night, Muddy Waters announced on Twitter it was shorting Luckin Coffee, based on an anonymous 89 page report it received.

I kind of feel surreal realising that Muddy Waters has the same acronym as Momentum Works. Anyway, Luckin’s share price plunged promptly:

Over the course of the day (or night in Asia), the price dropped further to below $27 before recovering, with two interesting trades looking like pillars of a gate:

On the same day, Citron Research claimed that they had also received the report, but decided to support Luckin instead.

The question is, who wrote that report? It is very detailed and probably took quite a bit of effort (including on the ground research) to put together. It claims to have “randomly gathered”) more thank 25k receipts:

Based on the chatter on Chinese social media, including some of the groups moderated by Momentum Works, there are a lot of theories on who is really behind the report. We found these two particularly interesting:

  1. Muddy Waters wrote the report themselves. However, since they are not entirely sure whether it would be effective, they did not put their name behind it
  2. Luckin itself wrote the report. Would not speculate the reason but you know what what could be the motives behind.

The people in those groups, however, agreed that Muddy Waters is in general more competent than Citron Research.

What an interesting world we are living in.

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Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.