It has been a good week for short sellers. Muddy Waters, run by short seller Carson Block, triumphed with two bets on Chinese companies where it alleged frauds. The after-effects, which are spreading to other US-listed Chinese peers, should spur more gains for market sceptics.
Shares in China’s Starbucks rival Luckin Coffee had plunged 84 per cent this month, until trading was halted on Tuesday. The group admitted to fabricated sales amounting to as much as 44 per cent of last year’s revenues. Muddy Waters, which had disclosed a short position in January, stands to profit handsomely.
This week, the shortseller’s two-year-old claim that China’s largest tutoring business, TAL Education Group, inflated profits was confirmed by the Beijing-based company. It had inflated sales through forged contracts with its vendors. Shares have dropped almost 7 per cent since Tuesday’s announcement.