(Reuters) – U.S. short-selling firm Muddy Waters said on Thursday it had acquired a short position in KE Holdings Inc, the biggest housing brokers in China, pushing its shares down as much as 10.9% premarket.
The short seller questioned the value of the company’s transaction volumes, store count and agent count, as well as the company’s reported revenue.
Muddy Waters wrote in a research note KE Holdings had inflated its new home sales and its commission revenues, listed ghost stores as ‘active’ on its platform and also overstated the value of some acquired assets.
“Similar to Luckin Coffee, this is a real business with significant amounts of fraud,” said Muddy Waters, comparing it to the Chinese rival to Starbucks, which fraudulently inflated its share price by falsifying revenue.
According to Muddy Waters, the company inflated its new home sales GTV (Gross Transaction Value) by over 126% and its commission revenues by about 77%–96%, while operating far fewer brokerages than its platform count shows.
KE did not immediately respond to a Reuters request for comment.
Earlier this year, Reuters reported that KE Holdings was planning a Hong Kong stock market listing and had hired Goldman Sachs to lead a float. However, the company had denied this report stating they had no imminent plan.
U.S.-listed shares of the company tanked 10% lower in premarket trade following the short seller’s report, but recovered losses to trade up 3.2% in early deals.
(Reporting by Ashwini Raj in Bengaluru; Editing by Krishna Chandra Eluri)
