Independent audit reports show how clean shells triumph over muddy waters


On January 28, Shell released “Internal audit report of independent audit Committee against Muddy Waters short”.After more than a month, the shells hit back at the muddy water.According to shell’s official statement, the company’s audit committee, consisting of shell’s three independent directors, conducted an internal investigation into the key allegations in the report immediately after Muddy Waters issued its short selling report on December 16, 2021.Independent third party consultants, including an international law firm and forensic accounting experts from a Big Four accounting firm that is not our auditor, have been retained to assist in the internal investigation.At present, the internal investigation has been substantially completed.Based on its internal investigation, the audit committee concluded that the allegations in the Muddy Waters report were not supported by facts.On December 16, short seller Muddy Waters alleged that kaulzhaofang, a US-listed property trading platform, had falsified financial data and committed fraud.As a professional short seller in the United States, Muddy Waters has always been known to do the idea of the stock.According to statistics, at present muddy water short nearly 40 listed companies, together with this shell to find a house, encountered short in the general idea shares about 19.The selection of shell, most likely to see China’s regulation of the real estate industry, the second-hand housing transaction volume decreased, has a certain impact on the overall performance of shell.Muddy Waters said in its short note that it estimated Shell’s revenue figures for the second and third quarters of 2021 were overstated by 77% to 96%, gross new home transaction volume (GTV) was overstated by 126%, and inventory transaction volume was overstated by 33%.In addition, Muddy Waters questioned Shell’s stores and number of employees.In the face of all kinds of criticism from muddy water, shell quickly listed data back, the market has also given an objective judgment.Is muddy water after all deliberate speculation, for the capture of stock earnings, or shell really lack of growth?Previously, Shell chairman and CEO Peng Yongdong officially announced the “one body and two wings” strategy, in the policy of good gradually emerged at present, seems to be declaring shell has entered the strategic “window period”.01 Shells wronged?Muddy Waters’ credibility and professionalism have been repeatedly questioned in recent years, in contrast to its earlier short reports.The shell short, including the Gold, Citic, a number of third-party professional institutions that are not professional, the lack of understanding of the Chinese market.In the report, Muddy Waters collected data from Shell for 76 days from May 25 to August 8 to simulate the company’s GTV for the entire second quarter of 2021.Many insiders believe that this practice is highly subjective and misleading, short conclusions lack accurate data support.Citic Securities pointed out that in China’s second-hand house and new house markets, the bottom-up summary of transaction data cannot obtain reliable results of total transaction volume, and if researchers try to summarize transaction volume bottom-up based on C-end display, it is easy to make a big difference.Meanwhile, in response to Muddy Waters’ argument that Shell inflated the size of real estate transactions, Citic Securities believes that it is much more difficult than inflating the records of general consumer goods transactions, because real estate transactions involve complicated application of property licenses and payment of taxes and fees for real estate transactions.Baiguan Technology, a digital business decision-making agency funded by STANDARD & Poor’s Global Investment, has been tracking Shell platform for a long time. According to the agency, Muddy Waters’ method is mainly to obtain the transaction volume of new and second-hand houses in each store through intermediary stores. Baiguan has also investigated this method, but found that this method will lead to significant deviation.According to Shell, Muddy Water did not use the real average price of housing stock of Shell, but selected the average price of external housing from CRE for fuzzy substitution.In addition, langfang, a third-tier city, is selected as a sample. The real estate market capacity of the city itself is low, which is not enough to represent the overall situation of shell stores.Judging from muddy Waters’ previous failed short bets, the agency often has a huge perception error for companies with no target in the US.In the opinion of Yan Yuejin, research director of e-House Think Tank Center, overseas capital does not have a good understanding of Shell’s business model and the opportunities of China’s new urbanization in the real estate market.Undeniably, the domestic real estate industry has been affected by policies since 2021, and the market sentiment tends to be pessimistic, giving short sellers the reason to gain more chips by deliberately suppressing.But muddy Waters’ report conspicuously ignores the complexity of macro-control and the latest developments in China’s property market.From December 8 to 10, 2021, the Central Economic Work Conference said that it will adhere to the positioning that houses are for living in, not speculation, and support the commercial housing market to better meet the reasonable housing needs of home buyers, as the city adopts policies to promote the virtuous cycle and healthy development of the real estate industry.All these once again make it clear that real estate is a pillar industry.CRR Real Estate research points out that in the second half of 2021, as the market continues to turn cold, the real estate credit policy is moderately corrected, involving the unfreezing of financing for housing enterprises, and the marginal improvement of personal mortgage loans.This means that the pace of deleveraging in the industry will be properly controlled, and personal mortgage loans are expected to continue to be deregulated, thus supporting people’s self-use and improving home purchase consumption.To the real estate transaction as the core business shell, these are undoubtedly stable enterprise development of the positive signal.In terms of muddy water, data omission, lack of cross-validation and small sample size…All kinds of signs show that muddy water malicious short shell probability is larger.Yan yuejin believes that such a crude, overly arbitrary short-selling operation based on financial data needs to be wary of.Whatever the muddy waters may say, the reaction of capital markets is truer.On the day of the muddy Waters report, Kauri shares opened lower and rose higher. Though they fell early in the session, they quickly recovered and rose more than 15% during the session.After shell issued a detailed response the next day, its shares closed at $19.36, up 5.73%, by the close of trading.The capital market is optimistic about the shell, because we are too familiar with the short profit ideas of institutions.These institutions often profit from falling share prices by finding “problem companies”, selling the company’s stock, taking positions and then issuing short reports.Had a lawyer to the media revealed a short-seller profit method, from the law firm, audit institutions, to the accounting firm, research agencies and hedge funds, and formed a complete chain of interests between “hedge funds after receiving short report, usually in secret to buy stocks, such as cooperate with depressing prices after the report, if successful, both sides get profits will be very considerable.”The capital market understands that it is easier for an enterprise to hide from the enemy than from the enemy, so what they care about is whether the cash flow of the enterprise has the possibility of stable growth.It is understood that shell is currently taking payment collection as the primary standard to undertake new home business, and payment collection will be greatly accelerated in the third quarter of 2021.In view of the low concentration of accounts receivable and strict management, industry analysts believe that although affected by the debt risk of housing enterprises, but the overall controllable shell.In addition to further control of financing risks, shell is now in the industry environment is also improving.Since October 2021, the high-level of the real estate industry intensive voice, the financial sector also timely response.Yi Gang, governor of the People’s Bank of China, said recently that relevant departments and local governments have taken active measures to defuse risks in a steady and orderly manner to meet the normal financing needs of residents and real estate companies, and market expectations are gradually improving.According to shell Research Institute monitoring, at the end of 2021, the second-hand housing market in three months ended the continuous downward trend of transaction volume since April, and recovered moderately in September at the historical low transaction volume.Some key cities are gradually coming out of the trough, such as Shenzhen, Guangzhou, Dongguan, Foshan, Shanghai, Hefei, Suzhou and other trading volume continued to improve.As the number of transactions showed positive changes, in December shell 50 city second-hand housing price index fell for the first time since the current round of decline, the number of cities where prices fell is also decreasing.In addition, according to the latest statement of the People’s Bank of China, “we will use a variety of monetary policy tools comprehensively to maintain reasonable and abundant liquidity, enhance the stability of total credit growth, increase support for the real economy, and keep the growth of money supply and social financing basically matching the growth of the nominal economy”, shell Institute estimates.In 2022, the total amount of real estate mortgage will reach 8 trillion yuan (including 3.8 trillion yuan of loan repayment), which is expected to leverage a transaction volume of 22-23 trillion yuan.Although sales may be down a bit, the volume of deals is still huge.With the gradual improvement of the follow-up policy adjustment, the marginal improvement of the credit environment and the gradual recovery of the sales end of the real estate market are highly likely events.This also means that real estate transactions as the main source of cash flow shell, further enhance the stability of the enterprise.Qian Kai, an analyst with CICC, said that as China’s largest online and offline integrated real estate transaction and service platform, Shell has the ability to calm the market cycle fluctuations to a certain extent.Although the market turnover and shell fundamentals year-on-year growth in the next few months will still be under pressure, but the sequential improvement trend is more certain.Shell reinforcement moat way, not only rely on policy good, this round of real estate market adjustment also give Shell to think about the future business development model of the opportunity.In 2021, Peng Yongdong put forward the strategy of “one body and two wings”, taking home decoration and Pratt & Whitney as the “two wings” of shell business in addition to the main track of second-hand house and new house transaction service.Begin from 2019 actually, shell with “bed” this one sub brand begins to explore home outfit.In the first quarter of 2021, version 1.0 of shell’s self-developed and technologically advanced BIM system was fully online, realizing the comprehensive digitalization of decoration design.In July 2021, Shell Zhaofang acquired Shengdu Home Decoration at the price of 8 billion yuan, which is a well-known decoration enterprise in East China.In early 2021, shell entered the field of home furnishing.The “second wing” is shell’s traditional business type – renting.Peng Yongdong believes that under the circumstance of “both renting and purchasing”, whether leasing can become a way of life and how it can benefit the new youth, new citizens and old communities in the city are the reasons why Shell can create new values and upgrade it to a higher level of layout.Anchoring the new track by shell is not only a way to make blood from oneself, but also a way to show sustainable growth to the outside world.Data show that in the third quarter of 2021, in the emerging and other businesses, shell self-run quilt home decoration and the proposed acquisition of Shengdu home decoration are steadily advancing.Bedding home decoration completed 1127 orders in Beijing in the third quarter, up 35% from the previous quarter.No one company can accurately predict the industry changes and policy direction, the only control is its own management and service.Today, shells have entered a new stage of inward exploration, and the reform around China’s residential field will continue, and the test of shells will not stop.As a practitioner of China’s industrial Internet, Shell is destined to grow in the voice of doubt and prove its value with public praise and performance.Disclaimer: This article is reproduced for the purpose of conveying more information.If the source is wrong or violated your legitimate rights and interests, please contact the author with proof of ownership, we will promptly correct, delete, thank you.Email address: newmedia@xxcb.cn

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