Another Luckin moment is coming?

Still remember the Luckin moment a few weeks ago? Back then, Luckin, the so-called "Chinese Starbucks" was trading around $30s and I was targeting it to decline towards $20. Then suddenly overnight, it crashed down below $10. Why? It was found to be involved in accounting frauds! Lucky me? Not at all unfortunately😵 I didn't consider this black swan event but only relied on my TA analysis and therefore I used a special calendar spread, which would only make money in a specific range. It was way below my range and therefore I didn't make money at all😤😠 By the way, now Luckin is trading below $2 on its way to nullification!

Now we may be seeing another Luckin moment coming. This time, another Chinese company for online education, GSX Tecedu. Again, it is being accused of being involved in fraudulent activities per the famous Muddy Waters Research, which was spot on in their early warnings about Luckin Coffee.  Here's the summary of the accusation:

We are short GSX because we conclude that it is a near-total fraud. We conclude that at least ~70% of its users are fake, and we think it's quite likely that at least ~80% of its users are fake.Our conclusions are based on GSX's own user and attendance data files (i.e., this is not from "scraping" data). We downloaded GSX's data from more than 200 paid K-12 classes covering 54,065 unique users. In addition, a former GSX manager corroborated our analysis, and explained various details of GSX's extensive bot operation.Based on the near total faking of users, we assume that the fraudulent portion of GSX's revenue is at least equal to the percentage of fraudulent users, although it would not surprise us if the ASP on the real portion of GSX's business is fraudulently inflated too. We conclude that GSX is a massive loss-making business. Without users, there is no revenue. We also conclude that GSX greatly understates expenses. Regardless of how one cuts it though, GSX is an almost completely empty box.Amazingly, Chairman Chen has found a way to make GSX shares even more dangerous for long holders – he has pledged at least $318 million of stock. Long holders of GSX face the risk that the margin lenders will be forced to aggressively sell the stock, crashing the price.

Of course, accusation is accusation  and we don't know for sure yet if these or some of them are indeed the facts! But given the reputation of Muddy Waters in hunting for fraudulent companies in the past few years, don't just ignore it, especially if you are holding the GSX shares right now!