{ "schemaVersion": "deck-intelligence.v1", "id": "019dd923-622c-750b-8b95-b524c5d9c7a3", "slug": "4be0499ce775", "title": "Orient Paper Inc. (ONP)", "subtitle": "Carson Block and Sean Regan · 2010-07", "author": "Carson Block and Sean Regan", "date": "2010-07-02 00:00:00", "pageCount": 10, "kind": "shareholder-letter", "orientation": "portrait", "aspectRatio": 0.77272725, "targetCompany": "Orient Paper Inc.", "targetTicker": "ONP", "document": { "id": "019dd923-622c-750b-8b95-b524c5d9c7a3", "slug": "4be0499ce775", "title": "Orient Paper Inc. 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Notable as an early Muddy Waters document that explicitly recounts the origin story of the firm (formed after the ONP WAB Capital due-diligence episode). Rich in CFO Q&A transcripts that function as CEO-quote-contradiction device. No charts, no branding, no valuation model — pure narrative rebuttal. Classified as letter rather than research_note because of the signed-perspective structure.", "kpisCited": [ { "detail": "ONP claims $102 million of paper products, but logistics to ship that volume do not exist at the site", "metric": "Reported paper product shipments" }, { "detail": "Pile of recycled paper in open environment reportedly valued at $4.6 million", "metric": "Recycled paper inventory value" }, { "detail": "ONP claims 600 workers with no employment contracts, including the chairman", "metric": "Workforce" }, { "detail": "Approximately $13 million, appraised by an unknown local Baoding firm", "metric": "Shuang Xing asset acquisition price" }, { "detail": "CFO Winston Yen suggested ~20,000 shares; no offer was ever formalized", "metric": "Proposed WAB research compensation" } ], "closingAsk": "Investors should treat small US-listed China stocks as caveat emptor and rely on genuine on-the-ground due diligence rather than US-driven promotion.", "extraction": { "at": "2026-04-22 18:54:40+00", "model": "unknown-legacy", "runId": null, "seconds": 76.8806, "promptVersion": null }, "scqaReward": "Investors who trust the on-the-ground diligence rather than the US-driven promotion can avoid further losses in ONP and other touted small-cap China frauds; no explicit price target is provided.", "thesisTypes": [ "fraud_exposure" ], "top3Reasons": [ "Factory visited in January 2010 is dilapidated and cannot produce $102M of paper products", "ONP's reported asset values exceed brand-new equipment prices; plant is visibly staged", "WAB never proposed paid research; ONP failed due diligence so no offer was made" ], "scqaSituation": "Orient Paper (ONP), a US-listed Chinese paper microcap, published a press release and was defended by TheStreet.com reporter Rick Pearson after Muddy Waters' initial short report alleging fraud.", "thesisSummary": "This July 2010 letter is Muddy Waters' rebuttal to a TheStreet.com article by Rick Pearson that defended Orient Paper after Muddy Waters' initial short report. Factory consultant Sean Regan details his January 5, 2010 site visit to the Baoding plant, arguing the dilapidated facility, absence of heavy-truck infrastructure, exposed recycled paper piles, steam-soaked workshops, and reported asset values above new-equipment replacement cost prove ONP cannot generate its claimed $102 million in paper sales. Carson Block rebuts Pearson's allegations point-by-point and denies that the report was retaliation for ONP rejecting a $300,000 paid-research proposal from his father's firm WAB Capital, explaining WAB never made an offer because ONP failed due diligence. The authors argue ONP exemplifies the broader need for genuine ground-level diligence on US-listed Chinese microcaps.", "primaryDemands": [ "Disregard Rick Pearson's TheStreet.com article defending ONP", "Recognize that the factory visited cannot produce ONP's reported output", "Reject the claim that Muddy Waters' report was a vendetta for rejected paid research" ], "scqaResolution": "Regan and Block present firsthand factory-inspection evidence, detailed due-diligence Q&A with CFO Winston Yen, and a full account of the WAB Capital interaction to demonstrate the original fraud thesis stands unaltered.", "thesisOneLiner": "Muddy Waters stands by its ONP fraud thesis: the Baoding factory is incapable of producing reported output, and the 'rejected $300K research fee' vendetta narrative is fabricated.", "precedentsCited": [], "scqaComplication": "Pearson's video and article claimed Muddy Waters analyzed the wrong subsidiary and that the report was a vendetta for ONP rejecting a $300,000 paid-research proposal — narratives the authors say vested interests are using to distract investors.", "narrativeInterest": 4, "notableSlidePages": [ 1, 3, 7 ], "peerCompaniesCited": [], "valuationFrameworks": [ "asset_value" ], "visualCraftInterest": 1 }, "pitchdeck": { "metadata": null, "profile": null }, "slides": [ { "page": 1, "type": "tension", "title": "This is a text-heavy shareholder letter page acting as a rebuttal to a press release.", "function": "expose_contradiction", "imagePath": "https://imgproxy.kitesheet.com/gkG5rKfMgwHF02x23nT_ggC3HiXGUWt3i5pN-BnFcsI/rs:fit:1200:1200:0/q:82/f:webp/czM6Ly9raXRlc2hlZXQvY29ycHVzL3NsaWRlcy80YmUwNDk5Y2U3NzUvcDAwMS5wbmc", "rawType": "expose_contradiction", "block": null, "metadata": { "slideType": "expose_contradiction", "slideTypeCanon": { "name": "Expose contradiction", "slug": "expose_contradiction", "status": "active", "canonId": "019de52d-124c-75aa-984a-0a3d0d8fc8df", "version": 1, "description": null }, "function": "expose_contradiction", "functionCanon": { "name": "Expose contradiction", "slug": "expose_contradiction", "status": "active", "canonId": "019de52d-171f-776f-887c-73edaff4cf9c", "version": 1, "description": null }, "density": "dense", "densityScore": 62, "componentCount": 7, "textChars": 1270, "nDataPoints": 0, "notes": "This is a text-heavy shareholder letter page acting as a rebuttal to a press release.", "elementsJson": [ "paragraph" ], "confidence": 0.9, "extraction": { "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "at": "2026-05-02 20:53:40.435+00", "seconds": 2.991, "promptVersion": "v2-canon-conditioned" } }, "links": { "slide": "/slides/019dd923-622c-750b-8b95-b524c5d9c7a3/1", "deck": "/decks/019dd923-622c-750b-8b95-b524c5d9c7a3", "deckAnchor": "/decks/019dd923-622c-750b-8b95-b524c5d9c7a3#slide-1", "deckJson": "/decks/019dd923-622c-750b-8b95-b524c5d9c7a3.json" }, "components": [ { "bbox": null, "kind": "callout", "text": "The ONP story", "attrs": null, "canon": { "kind": { "name": "Callout", "slug": "callout", "status": "active", "canonId": "019de52c-f8d3-761a-8953-7d37080de5e2", "version": 1, "description": "Highlighted callout box." }, "tool": { "name": "Visual emphasis", "slug": "visual-emphasis", "status": "active", "bestFor": null, "canonId": "019dd9e1-474b-736b-a8eb-a794dd88241c", "version": 1, "bodyDocId": null, "description": "Drawing the eye to one element above the rest of the slide.", "familyLabel": null }, "subkind": null, "framework": null }, "subkind": null, "groupRole": null, "confidence": null, "extraction": { "at": "2026-04-23 01:18:10+00", "model": "unknown-legacy", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "019dd953-64d2-7657-bbed-0cc0ed049f42", "parentComponentId": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.49 }, "kind": "paragraph", "text": "What surprises me most during my recent introduction to the investment banking / research world is how ill equipped many investors are at gauging production facilities, yet they invest in them anyway.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:40.435+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "06373c00-c2bd-410d-9f88-99396fd782c2", "parentComponentId": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.42 }, "kind": "paragraph", "text": "Rick Pearson’s story posted on TheStreet.com contains some truths. They’re just not relevant to ONP’s true situation. The ONP story is about open secrets and an emperor with no clothes.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:40.435+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "1d504ac4-6bb7-49dc-b520-247e22d35bb7", "parentComponentId": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.34 }, "kind": "paragraph", "text": "Vested interests are attempting to distract the market from ONP by focusing attention on the authors of the report. We respond as follows. Sean Regan’s Perspective:", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:40.435+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "78cb1fb3-2434-4e2c-a334-afb71694a8ad", "parentComponentId": null }, { "bbox": { "h": 0.15, "w": 0.72, "x": 0.14, "y": 0.09 }, "kind": "paragraph", "text": "July 2, 2010. Yesterday we released a response to ONP’s press release stating that we had analyzed the wrong operating subsidiary. 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On all accounts, ONP fails the due diligence test.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:45.616+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "3573d020-c28e-4f51-aa1f-ac8462f0347d", "parentComponentId": null }, { "bbox": null, "kind": "paragraph", "text": "We knew that our report would not help Pearson’s career or reputation. However, we bore - and still bear - no ill will toward him. Nonetheless, we were surprised that he produced a video in which he’s standing in front of clearly antiquated machinery talking about how the stock is a double. No doubt that Pearson is a smart guy with numerous accomplishments, but as Sean writes above, two people with varying experience levels can look at something entirely differently. In the factory, we clearly have the advantage.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:45.616+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "5b134080-bdf2-409b-9710-21d60a543f9e", "parentComponentId": null }, { "bbox": null, "kind": "paragraph", "text": "Rick Pearson, Sean Regan, and I are alumni of the University of Southern California. I did not meet Pearson until after I graduated. A former Chinese professor under whom we had each studied introduced us. We met once or twice in Hong Kong in 1998 or 1999, and hadn’t spoken again until we met at ONP. Sean had never met Pearson prior to ONP. As Rick wrote, he and I caught up on the way to the factory, talking about the paths our lives had taken from just after graduation, including how he had gone from Deutsche Bank to China microcaps.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:45.616+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "5d4b904f-85d3-491a-95dc-eab972f5643a", "parentComponentId": null }, { "bbox": null, "kind": "paragraph", "text": "plant and equipment were dilapidated. The asset values reported to the SEC did not match what we witnessed. The ONP asset values are significantly higher than what similar equipment sells for brand new. We later confirmed this with more research, but I could see it in two seconds.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:45.616+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "94b07ba2-e079-41f8-a420-74797ef1879e", "parentComponentId": null }, { "bbox": null, "kind": "paragraph", "text": "In the following seven pages, I rebut the allegations in Rick Pearson’s article. I also address the allegation (which Rick made as well) that our report was a vendetta for ONP turning down a proposal for paid research. We were engaged to perform due diligence for a separate company that was in discussions to provide paid research services to ONP. ONP failed due diligence, and no such proposal was ever made to - nor rejected by - ONP. Muddy Waters, LLC was born of the realization ONP provided us - that there is a gaping need for due diligence in China equity research.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:45.616+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "c14755db-92d2-41b1-92fd-353a53c4d1e7", "parentComponentId": null }, { "bbox": null, "kind": "paragraph", "text": "The logistics needed to ship $102 million of paper products in China did not exist. The steam easily viewed in the video and water on packing tables refutes all claims of a quality paper product. One would not ship good quality production, paper included, uncovered in an open bed truck. The storage of millions of dollars of recycled paper in the open environment is irresponsible at best. And if that paper pile in the back of the plant is worth USD 4,600,000, save your office paper because you may be able to retire on it one day.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:45.616+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "e28d49c7-20af-4af5-9fd4-89668849c543", "parentComponentId": null } ], "metrics": [], "tools": [], "frameworks": [ { "matchId": "d7eb4b31-1ac1-4a77-8afd-ea327594148b", "evidence": "The text explicitly states 'I rebut the allegations' and addresses specific claims made by a third party.", "framework": null, "confidence": 1, "extraction": { "at": "2026-05-02 20:53:45.616+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "pageNumber": 3, "frameworkName": "preempt_rebuttal" } ], "arcBeats": [ { "to": 5, "arc": { "name": "The Consultant's Gambit", "slug": "consultants-gambit", "status": "active", "bestFor": "Business cases, project proposals, strategic recommendations", "canonId": "019dd956-5e0a-73c8-b305-81c38c959e9c", "version": 1, "bodyDocId": "019df22a-2356-73eb-8061-d8c81dc0aa49", "structure": "Situation & Context -> Problem & Complication -> Solution & Approach -> Evidence & Proof -> Impact & Next Steps", "description": null, "familyLabel": null }, "from": 3, "name": "Problem & Complication", "beatId": "f84ca43a-c352-41f3-8efe-252311489d1a", "matchId": "9c389dfe-e1cd-407c-8425-244f17d8ea3b", "beatType": { "name": "Problem & Complication", "slug": "consultants-gambit-problem-complication", "status": "active", "canonId": "019dd9b8-064a-777f-a374-e9a8c43dedd4", "version": 1, "description": null }, "evidence": "The document then addresses the complication and problem posed by Pearson's assertions.", "position": 1, "isPrimaryArc": true, "parentBeatType": { "name": "Complication", "slug": "complication", "status": "active", "canonId": "019dd9b8-0275-7709-b2d6-4f77c3fc7579", "version": 1, "description": "The point in the narrative where the audience should feel discomfort. 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Several times during the tour and in the car on the way back to the station, he exclaimed, \"They're printing money!\"", "attrs": null, "canon": { "kind": { "name": "Callout", "slug": "callout", "status": "active", "canonId": "019de52c-f8d3-761a-8953-7d37080de5e2", "version": 1, "description": "Highlighted callout box." }, "tool": { "name": "Visual emphasis", "slug": "visual-emphasis", "status": "active", "bestFor": null, "canonId": "019dd9e1-474b-736b-a8eb-a794dd88241c", "version": 1, "bodyDocId": null, "description": "Drawing the eye to one element above the rest of the slide.", "familyLabel": null }, "subkind": null, "framework": null }, "subkind": null, "groupRole": null, "confidence": null, "extraction": { "at": "2026-04-22 23:05:23+00", "model": "unknown-legacy", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "019dd953-0395-748f-9561-4e49831d29af", "parentComponentId": null }, { "bbox": { "h": 0.08, "w": 0.72, "x": 0.14, "y": 0.92 }, "kind": "paragraph", "text": "After lunch, we met at ONP's corporate office. Sean asked a number of questions about production, measuring production, and the products. I had prepared a number of detailed questions before hand about ONP's strategy. (I did not ask many financial questions because as I explain below, our role was due diligence; and, Winston Yen is the person to address financial questions.)", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.724+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "21abf8d7-9d74-4d7a-9bab-ea7dd098028c", "parentComponentId": null }, { "bbox": { "h": 0.18, "w": 0.72, "x": 0.14, "y": 0.73 }, "kind": "paragraph", "text": "It is true that I didn't ask many questions during the visit. Sean was obviously running point on the factory portion. The two-hour lunch with Chairman Liu, his brother, and some other ONP personnel was social. Chairman Liu ordered bai jiu (a potent Chinese spirit). Rick and I actively imbibed with the Chairman at his invitation. Sean and our interpreter did not. Rick sat next to the Chairman and spoke with him a good deal. After the lunch, Sean told me that both Rick and I need to learn Chinese business meal etiquette, such as how to give and receive toasts. He told me he was surprised given the number of Chinese companies Rick sees that he doesn't know social etiquette well.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.724+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "3eef03b0-d2c3-4c58-97e9-17519ecedab1", "parentComponentId": null }, { "bbox": { "h": 0.15, "w": 0.72, "x": 0.14, "y": 0.09 }, "kind": "paragraph", "text": "I disagree with Pearson's assertions that we didn't ask questions. During the factory tour, Sean was repeatedly stopping to ask detailed questions about the machinery, processes, and chemicals. Chairman Liu was clearly impatient with the questions.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.724+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "5d17c2b7-8889-4f67-9e2d-654ea4f7ecc1", "parentComponentId": null }, { "bbox": { "h": 0.15, "w": 0.72, "x": 0.14, "y": 0.57 }, "kind": "paragraph", "text": "One thing Rick did that really bothered me was shortly after entering the first workshop, he turned to Sean and requested that Sean film him walking around. He already had the camera out, practically in Sean's hand before Sean had the chance to respond. (Sean and I had previously explained to Rick that Sean is a factory expert, and that his role was to conduct technical due diligence in the factory.) Sean took the camera, but fortunately shed it about one minute later by handing it off. Sean was no longer impeded by any recording duties.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.724+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "731f5306-87d7-4461-8644-9efe6901912b", "parentComponentId": null }, { "bbox": { "h": 0.1, "w": 0.72, "x": 0.14, "y": 0.25 }, "kind": "paragraph", "text": "It is true that Sean is not proficient in Chinese, and our interpreter had to translate a good deal of technical speech. Pearson asked his questions in Chinese. I understood his questions, and knew that he was not asking questions that were nearly as technical or detailed as those Sean asked.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.724+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "d874ef3e-1554-4247-b9be-e79eb00be4e0", "parentComponentId": null }, { "bbox": { "h": 0.2, "w": 0.72, "x": 0.14, "y": 0.36 }, "kind": "paragraph", "text": "Rick may have misinterpreted my silence in response to certain comments he made during the tour. Several times during the tour and in the car on the way back to the station, he exclaimed, \"They're printing money!\" (I assume he meant it in the legitimate sense.) I was conflicted. I felt the company was a sham and I wanted to help Rick out by telling him so; but, to do so was illogical. I clearly had a relationship with certain people associated with the company. I kept largely silent in response to his comments about the company and his questions as to what I thought. 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Nor did ONP reject a proposal from us, or from the company that engaged us to perform due diligence, for compensated research.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.416+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "0629e79e-66df-4da7-8355-e63fea926571", "parentComponentId": null }, { "bbox": { "h": 0.12, "w": 0.72, "x": 0.14, "y": 0.665 }, "kind": "paragraph", "text": "When my father first spoke with me about ONP, I was skeptical. The amount of money it intended to raise to expand its paper factory seemed excessive. I told him to assume that construction expenses would be padded - the question was to what extent...", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.416+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "47898c9c-810e-46c4-9e0f-3a0fcf0af511", "parentComponentId": null }, { "bbox": { "h": 0.08, "w": 0.72, "x": 0.14, "y": 0.58 }, "kind": "paragraph", "text": "In late 2009, my father developed an interest in China microcaps after attending a conference in Florida. 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Capital LLC (\"WAB\"), which writes equity research that it distributes to institutional investors. In many cases, it takes management on road shows to meet with institutional investors. In 1999, WAB switched its model...", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.416+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "846cd173-8c3d-4439-97ea-d83c368e337d", "parentComponentId": null }, { "bbox": { "h": 0.05, "w": 0.72, "x": 0.14, "y": 0.52 }, "kind": "paragraph", "text": "I left CIBC World Markets in mid-1999 and went to work with my father at WAB. I worked there full-time for about two years until mid-2001. Since leaving WAB, I have consulted for it on five projects.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.416+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "89e5d99a-c1a1-4973-907d-622aae247e7f", "parentComponentId": null }, { "bbox": { "h": 0.1, "w": 0.72, "x": 0.14, "y": 0.79 }, "kind": "paragraph", "text": "That was a red flag to me. In my time in China, I've found out that people or things billed as \"different\" are usually too much \"the same.\" I thought that if the Boy Scout legend turned out to be untrue... it shows a deliberate attempt to game the American investor psyche.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.416+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "cab2725a-069e-4c2d-8d2d-a8b25a58e783", "parentComponentId": null }, { "bbox": { "h": 0.05, "w": 0.72, "x": 0.14, "y": 0.25 }, "kind": "title", "text": "On Whether Our Report is a Vendetta for ONP Refusing to Pay us $300,000 for Research", "attrs": null, "canon": { "kind": { "name": "Title", "slug": "title", "status": "active", "canonId": "019de52c-f7dd-76d9-b848-b1f12bd85cf4", "version": 1, "description": "Slide title or headline." }, "tool": null, "subkind": { "name": "Headline", "slug": "headline", "status": "active", "canonId": "019de52c-fae1-7463-9a7c-d60668eced0d", "version": 1, "description": null }, "framework": null }, "subkind": "headline", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.416+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "d4f764f5-a749-4435-8754-2cb77d973df0", "parentComponentId": null } ], "metrics": [], "tools": [], "frameworks": [ { "matchId": "cf41ba26-1bcd-4e78-8157-b7a460954988", "evidence": "The slide explicitly addresses and refutes a potential conflict of interest accusation regarding a $300k research fee.", "framework": null, "confidence": 0.9, "extraction": { "at": "2026-05-02 20:53:42.416+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "pageNumber": 5, "frameworkName": "preempt_rebuttal" } ], "arcBeats": [ { "to": 5, "arc": { "name": "The Consultant's Gambit", "slug": "consultants-gambit", "status": "active", "bestFor": "Business cases, project proposals, strategic recommendations", "canonId": "019dd956-5e0a-73c8-b305-81c38c959e9c", "version": 1, "bodyDocId": "019df22a-2356-73eb-8061-d8c81dc0aa49", "structure": "Situation & Context -> Problem & Complication -> Solution & Approach -> Evidence & Proof -> Impact & Next Steps", "description": null, "familyLabel": null }, "from": 3, "name": "Problem & Complication", "beatId": "f84ca43a-c352-41f3-8efe-252311489d1a", "matchId": "9c389dfe-e1cd-407c-8425-244f17d8ea3b", "beatType": { "name": "Problem & Complication", "slug": "consultants-gambit-problem-complication", "status": "active", "canonId": "019dd9b8-064a-777f-a374-e9a8c43dedd4", "version": 1, "description": null }, "evidence": "The document then addresses the complication and problem posed by Pearson's assertions.", "position": 1, "isPrimaryArc": true, "parentBeatType": { "name": "Complication", "slug": "complication", "status": "active", "canonId": "019dd9b8-0275-7709-b2d6-4f77c3fc7579", "version": 1, "description": "The point in the narrative where the audience should feel discomfort. 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What are you assuming is the cost per square meter or foot? Have the selected the contractor and how, or how did they intend to? What materials will you be building with? Will the machinery be domestic or imported?", "attrs": null, "canon": { "kind": { "name": "List", "slug": "list", "status": "active", "canonId": "019de52c-f94b-779b-a53b-fd4904a5f4d2", "version": 1, "description": "Bullet or numbered list." }, "tool": null, "subkind": { "name": "Bullet list", "slug": "bullet", "status": "active", "canonId": "019de52c-fc98-7169-a083-5cab805076ca", "version": 1, "description": null }, "framework": null }, "subkind": "bullet", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:41.892+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "ab4ae72d-f66b-441f-8683-08a33b01da44", "parentComponentId": null }, { "bbox": { "h": 0.28, "w": 0.72, "x": 0.14, "y": 0.63 }, "kind": "list", "text": "Q: If the margins on this business are so good, why is this company exiting the business? A: It's not exiting. It's relocating its business to Shandong province. Q: Why aren't they moving the equipment? A: It feels its better to buy new equipment in Shandong. Q: But presumably this is expensive equipment if ONP is paying around $13 million. How could buying new equipment be more sensible than transporting it? A: I don't know. Q: And ONP will be competing with them - right? 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Mr. Yen stated that he felt compensation of approximately 20,000 shares would be appropriate.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:41.892+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "061f3dc8-7f76-4d8d-bd21-b3e10a379284", "parentComponentId": null }, { "bbox": { "h": 0.08, "w": 0.72, "x": 0.14, "y": 0.53 }, "kind": "paragraph", "text": "Mr. Yen generally did not know the answers to these questions... 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Some of the questions, his answers, and my thoughts are below:", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:41.892+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "133ffc2c-0338-47cc-9106-5cf0076f5a3a", "parentComponentId": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.34 }, "kind": "paragraph", "text": "My father and I had lunch with Mr. Yen in November 2009... I tried to delve into the projected construction costs of the factory, asking questions including:", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:41.892+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "44c80213-2326-4678-a71a-ae53083abec5", "parentComponentId": null }, { "bbox": { "h": 0.08, "w": 0.72, "x": 0.14, "y": 0.24 }, "kind": "paragraph", "text": "My father of course had in mind that I would conduct the due diligence... 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Q: This is a new market for you. How will you sell these products? A: We're going to be hiring the salespeople from the company selling the assets. Q: Why wouldn't the salespeople have relocated? A: Some have, but not all of them wanted to (my thought: so you'll really be competing with the seller - makes no sense.)", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.54+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "18a2e645-063f-4cdb-b713-f6f1008c8115", "parentComponentId": null }, { "bbox": { "h": 0.05, "w": 0.7, "x": 0.15, "y": 0.88 }, "kind": "paragraph", "text": "Mr. Yen soon reverted that ONP is interested in a deal with WAB, and that I was welcome to visit the factory. We made plans to visit on January 4th.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.54+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "2144f3f5-988e-4ca7-a5c2-85ec22125ee4", "parentComponentId": null }, { "bbox": { "h": 0.15, "w": 0.7, "x": 0.15, "y": 0.28 }, "kind": "paragraph", "text": "Q: So if you're acquiring the assets and hiring the salespeople, why don't you acquire the company instead of the assets? Asset purchases are subject to a significant amount of tax. Registered capital purchases are not. A: I'm not sure, but actually we already acquired the assets in a way. 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(my thought: UH OH!)", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:46.54+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "5b9ba2aa-b035-4804-9058-acbb6ada3dfb", "parentComponentId": null }, { "bbox": { "h": 0.15, "w": 0.7, "x": 0.15, "y": 0.72 }, "kind": "paragraph", "text": "Not all sounded bad during this meeting. I believed that there were some internal problems at ONP, but I was open to the possibility that the problems were manageable. I told Mr. Yen that I would handle due diligence for WAB, but that I would bring a manufacturing expert along. I emphasized to Mr. Yen that I would be very thorough and look more closely at the company than anyone else had. I said that I want to see all production lines and the Shuang Xing assets. 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Sean leaned over and said \"We got 'em.\"", "attrs": null, "canon": { "kind": { "name": "Callout", "slug": "callout", "status": "active", "canonId": "019de52c-f8d3-761a-8953-7d37080de5e2", "version": 1, "description": "Highlighted callout box." }, "tool": { "name": "Visual emphasis", "slug": "visual-emphasis", "status": "active", "bestFor": null, "canonId": "019dd9e1-474b-736b-a8eb-a794dd88241c", "version": 1, "bodyDocId": null, "description": "Drawing the eye to one element above the rest of the slide.", "familyLabel": null }, "subkind": null, "framework": null }, "subkind": null, "groupRole": null, "confidence": null, "extraction": { "at": "2026-04-22 23:05:24+00", "model": "unknown-legacy", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "019dd953-0395-748f-9561-d50d9aee0a7d", "parentComponentId": null }, { "bbox": { "h": 0.13, "w": 0.7, "x": 0.15, "y": 0.76 }, "kind": "paragraph", "text": "After being taken to the factory (with Rick as a surprise fellow passenger), we had a few minutes of small talk with Chairman Liu in his office. Then we walked into the first workshop. The workshop walls were old and worn. But what really got me was the steam everywhere. Chairman Liu was moving quickly, and I was trying to keep up. I was a little disoriented because this was not what I had expected. After we passed the workers at the folding tables, we stopped at the cutting machine for the line. Sean leaned over and said “We got ‘em.” That was much faster than he'd expected.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.88+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "4d892c0f-191e-477e-9c2f-4365b647d7b4", "parentComponentId": null }, { "bbox": { "h": 0.12, "w": 0.7, "x": 0.15, "y": 0.27 }, "kind": "paragraph", "text": "When we got to Beijing one day late, our mentality had changed from long side due diligence to looking for evidence to build our short case. I had updated my father that there's no way this would be a WAB deal. He was fairly disappointed and played devil's advocate to a lot of the points I made about its inherent problems. In the end, he resigned himself to accepting that the company was not a buy.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.88+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "5121b1ea-1535-4cac-97ae-a693bea5c21c", "parentComponentId": null }, { "bbox": { "h": 0.15, "w": 0.7, "x": 0.15, "y": 0.11 }, "kind": "paragraph", "text": "On January 3rd, Sean and I were at Hong Qiao Airport in Shanghai for a number of hours due to the snow in Beijing. This was the first opportunity either of us had to look through the 10-K and recent 10-Qs. As we went through the documents, my jaw dropped a number of times. There were so many red flags, a number of which we covered in our report. By the time we finished our reading, we were convinced the stock was a short.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.88+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "59920abe-38d8-4d90-9f9d-435f0c94ab21", "parentComponentId": null }, { "bbox": { "h": 0.12, "w": 0.7, "x": 0.15, "y": 0.4 }, "kind": "paragraph", "text": "The morning we left for Baoding, Sean and I had a spat in the hotel café. I was pouring over my questions, notes, and the filings. I kept trying to discuss the question pattern with Sean, but he wasn't engaging. He was conversing with our interpreter. In an aside, I told him that he needed to get more serious. We exchanged expletives. We then left for the train station.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.88+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "9a409eaf-da16-4678-9302-db08aa49d61f", "parentComponentId": null }, { "bbox": { "h": 0.08, "w": 0.7, "x": 0.15, "y": 0.9 }, "kind": "paragraph", "text": "The only further communication between ONP and my father or me was on January 6, 2010 when Chairman Liu's assistant emailed me to ask whether I had any follow up questions. I said that we'd like to visit the factory again, but would wait until after the fundraise. (Because of our subsequent document research, that turned out to be unnecessary.) There was no further communication with ONP until this week.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.88+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "e71c6563-bb48-4ac2-868b-1f4c3fd969f6", "parentComponentId": null }, { "bbox": { "h": 0.22, "w": 0.7, "x": 0.15, "y": 0.53 }, "kind": "paragraph", "text": "On the train, Sean explained that it was unlikely one visit to the factory would be enough to build the case. He told me “I've visited over 1,000 factories and run three others. Running a factory is all about control. Guys who run factories are great at controlling people and conditions because they have to be. When you go to a factory, you're on his turf. You won't see what he doesn't want you to see the first time. That's why anytime I qualify a factory, I make at least three visits. They can cover things up, but you look for whether they're covering things up the same way each time. When you notice the differences, you understand what's going on.” I calmed down, accepting that we were likely to have to make at least one more trip out to ONP.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:42.88+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "fbcf0192-5517-4a36-87dd-f21c6704a7f9", "parentComponentId": null }, { "bbox": null, "kind": "quote", "text": "\"I've visited over 1,000 factories and run three others. 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Guys who run factories are great at controlling people and conditions because they have to be.\" — Sean", "attrs": null, "canon": { "kind": { "name": "Quote", "slug": "quote", "status": "active", "canonId": "019de52c-f8fb-751e-8bc6-d58e2d59562a", "version": 1, "description": "Pull quote or testimonial." }, "tool": { "name": "Authority citation", "slug": "authority-citation", "status": "active", "bestFor": null, "canonId": "019dd9e1-49ae-7557-89ad-3fca70469b45", "version": 1, "bodyDocId": null, "description": "Quoting an authority figure, study, or precedent to lend weight.", "familyLabel": null }, "subkind": null, "framework": null }, "subkind": null, "groupRole": null, "confidence": null, "extraction": { "at": "2026-04-22 23:05:24+00", "model": "unknown-legacy", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "019dd953-0395-748f-9561-dbfd8a71143f", "parentComponentId": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 8, "arc": { "name": "The Consultant's Gambit", "slug": "consultants-gambit", "status": "active", "bestFor": "Business cases, project proposals, strategic recommendations", "canonId": "019dd956-5e0a-73c8-b305-81c38c959e9c", "version": 1, "bodyDocId": "019df22a-2356-73eb-8061-d8c81dc0aa49", "structure": "Situation & Context -> Problem & Complication -> Solution & Approach -> Evidence & Proof -> Impact & Next Steps", "description": null, "familyLabel": null }, "from": 6, "name": "Evidence & Proof", "beatId": "80318c7b-9708-4b3a-b2b5-5b35fe211ff6", "matchId": "9c389dfe-e1cd-407c-8425-244f17d8ea3b", "beatType": { "name": "Evidence & Proof", "slug": "consultants-gambit-evidence-proof", "status": "active", "canonId": "019dd9b8-07b1-7688-8e1e-7637fec3802a", "version": 1, "description": null }, "evidence": "The document provides evidence and context to support its claims.", "position": 2, "isPrimaryArc": true, "parentBeatType": { "name": "Evidence", "slug": "evidence", "status": "active", "canonId": "019dd9b8-03f9-772a-b84a-4f07b415b77a", "version": 1, "description": "A dedicated proof beat exists in only ~4 arcs (Gambit, Sequoia, AIDA, Monroes). 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We intend to identify and recommend Strong Buys on them. When we do, we think that investors can be assured that these companies have been vetted more thoroughly than anybody else has done. But for the meantime, there are a lot of low quality companies that are being touted and pumped. This touting and pumping is US-driven. Unfortunately, there are those in the US who are complicit - if not orchestrating - these scams. Small China stocks remain caveat emptor for the time being.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:43.547+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "1a3dc330-1977-47fe-87a2-b70d23363f89", "parentComponentId": null }, { "bbox": { "h": 0.14, "w": 0.72, "x": 0.14, "y": 0.485 }, "kind": "paragraph", "text": "A number of my closest, dearest friends are Chinese. But the fact is that many of the small companies view analyst meetings as competitions for the money analysts represent. It's often a game where anything goes on the company side. We Westerners are not used to that system. To really understand how this works, you have to get burned on the ground here. With first-hand understanding of how business is conducted in China, you can see a lot more. Just like how a factory expert can identify far more issues than can a novice.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:43.547+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "5c6ad021-353a-4aa7-ab2b-6aa6fb244f9d", "parentComponentId": null }, { "bbox": { "h": 0.12, "w": 0.72, "x": 0.14, "y": 0.22 }, "kind": "paragraph", "text": "Sean and I were mildly shocked by Pearson's video and the positive reviews that ONP continued to receive. We've seen this across all industries in China: Westerners wanting a piece of the China pie so badly that they're willing to believe anything. I've had a fairly rare experience here in that I've done business at the multinational level (as an attorney with Jones Day), and then I climbed down into the trenches by opening Mainland's first international standard self storage company.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:43.547+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "97993a1c-77bf-4fb0-a9c0-b08e38af92e3", "parentComponentId": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.095 }, "kind": "paragraph", "text": "Thus, WAB never made an offer to ONP because ONP failed due diligence. My father felt, and I have to agree, that had WAB made an offer to ONP, it would have been accepted. Certainly that would have been an easier path to getting paid than we took with Muddy Waters, LLC.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:43.547+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "b3b93b2b-bef8-4757-ae24-ca449742fb75", "parentComponentId": null }, { "bbox": { "h": 0.08, "w": 0.72, "x": 0.14, "y": 0.625 }, "kind": "paragraph", "text": "ONP and its attendant hype opened our eyes to the massive need for due diligence in China equity research. Thus, the plan came together in between running our other businesses. We decided that we would form the service and issue an inaugural report on ONP to demonstrate our due diligence capabilities.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:43.547+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "ca6172b1-b4cb-4515-a9cc-b7f34dbfd9e6", "parentComponentId": null }, { "bbox": { "h": 0.12, "w": 0.72, "x": 0.14, "y": 0.36 }, "kind": "paragraph", "text": "After some time in the trenches as an entrepreneur here, I came to realize how ivory tower the multinational world (in China) is. My former Chinese colleagues - well educated, progressive, and diligent - are the cream of the crop here. The mistake too many foreign businesspeople make is thinking that the English speaking, relatively polished people they interact with here are representative of China. This myopia is a major factor affecting equity research on Chinese companies.", "attrs": null, "canon": { "kind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "5f2affc0-941d-4d07-959d-4bfc1930cea4", "version": 1, "description": "Single prose block in the body of a slide." }, "tool": null, "subkind": { "name": "Paragraph", "slug": "paragraph", "status": "active", "canonId": "019de52c-fb80-75af-aa5c-a7a4bfac2433", "version": 1, "description": null }, "framework": null }, "subkind": "paragraph", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:43.547+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "fdc72c3e-88c2-47f2-90ff-1b5cdfa84cf3", "parentComponentId": null }, { "bbox": { "h": 0.02, "w": 0.35, "x": 0.14, "y": 0.185 }, "kind": "title", "text": "On How We Came to Form Muddy Waters, LLC", "attrs": null, "canon": { "kind": { "name": "Title", "slug": "title", "status": "active", "canonId": "019de52c-f7dd-76d9-b848-b1f12bd85cf4", "version": 1, "description": "Slide title or headline." }, "tool": null, "subkind": { "name": "Headline", "slug": "headline", "status": "active", "canonId": "019de52c-fae1-7463-9a7c-d60668eced0d", "version": 1, "description": null }, "framework": null }, "subkind": "headline", "groupRole": null, "confidence": null, "extraction": { "at": "2026-05-02 20:53:43.547+00", "model": "google/gemini-3.1-flash-lite-preview-20260303", "runId": null, "seconds": null, "promptVersion": null }, "componentId": "556e9c22-1d27-4d1e-9c09-4618f1806ee3", "parentComponentId": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 10, "arc": { "name": "The Consultant's Gambit", "slug": "consultants-gambit", "status": "active", "bestFor": "Business cases, project proposals, strategic recommendations", "canonId": "019dd956-5e0a-73c8-b305-81c38c959e9c", "version": 1, "bodyDocId": "019df22a-2356-73eb-8061-d8c81dc0aa49", "structure": "Situation & Context -> Problem & Complication -> Solution & Approach -> Evidence & Proof -> Impact & Next Steps", "description": null, "familyLabel": null }, "from": 9, "name": "Impact & Next Steps", "beatId": "e4673b17-5fe9-4a9a-b878-864b2dfa9f28", "matchId": "9c389dfe-e1cd-407c-8425-244f17d8ea3b", "beatType": { "name": "Impact & Next Steps", "slug": "consultants-gambit-impact-next-steps", "status": "active", "canonId": "019dd9b8-0849-7728-9ee9-fd1609c4c655", "version": 1, "description": null }, "evidence": "The document concludes with a disclaimer and a summary of the company's position.", "position": 3, "isPrimaryArc": true, "parentBeatType": { "name": "Resolution", "slug": "resolution", "status": "active", "canonId": "019dd9b8-045d-703b-8dd7-e92aba3ba91b", "version": 1, "description": "How the deck ends. 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Following publication of this report, we intend to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter. Muddy Waters, LLC has obtained all information contained herein from sources we believe to be accurate and reliable. However, such information is presented “as is,” without warranty of any kind – whether express or implied. Muddy Waters, LLC makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. 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