{ "docId": "019dd923-622c-750b-8b96-9f72f88816eb", "docSlug": "2df2f979ea6a", "documentTitle": "China Internet Nationwide Financial Services Inc. (CIFS)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2017-12-20 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 15, "pageCount": 18, "prevPage": 14, "nextPage": 16, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 4, "notes": "This is a page from a short-seller research report (Muddy Waters) alleging fraud at CIFS.", "elementsJson": [ "paragraph", "photo", "footnote" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b96-9f72f88816eb/15", "deckHref": "/decks/019dd923-622c-750b-8b96-9f72f88816eb", "deckJsonHref": "/decks/019dd923-622c-750b-8b96-9f72f88816eb.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-9f72f88816eb#slide-15", "components": [ { "bbox": null, "kind": "callout", "text": "Even though it’s China, and it’s a fast growing economy, pigs do not fly.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-f5d0-745c-bebf-b074918a9939", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.3, "w": 0.52, "x": 0.35, "y": 0.23 }, "kind": "image", "text": "Photo of a customer gathering", "attrs": null, "subkind": "photo", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4ea1e612-b952-4239-a83b-d75ccef94c52", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "gross margin: 97%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd952-f5d0-745c-bebf-b8a8ecb00cf4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.78, "x": 0.11, "y": 0.6 }, "kind": "paragraph", "text": "All of the foregoing analysis should in actuality be superfluous. When we first heard of CIFS, it had us at 97% gross, and 70% net, margins – upon startup no less! Such instant business dominance seldom happens in the real world. Even though it’s China, and it’s a fast growing economy, pigs do not fly.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4d14db62-73fe-4f4d-a66d-30cad789db3c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.78, "x": 0.11, "y": 0.16 }, "kind": "paragraph", "text": "For sentimental reasons, we include the below picture from toprule.cn showing a February 2015 gathering with customers. (Hope you’re watching your wallet, friend.)", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "961b88d5-40d6-4e7a-8809-c231bd48c956", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.78, "x": 0.11, "y": 0.09 }, "kind": "paragraph", "text": "do not lose money and that he is very rich because he has a public company in the U.S. This brings up a risk that CIFS might effectively be on the hook for bad debts. We thought we should mention this, but it is honestly immaterial next to our conclusion that CIFS is a fraud.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b12cbc59-4559-47c0-bba1-849cedb4aeab", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.78, "x": 0.11, "y": 0.69 }, "kind": "paragraph", "text": "Let’s also consider what this extremely lucrative business model purportedly is: Starting in 2015 (not 1995) helping companies that are evidently large enough to qualify for $10 million to $60 million loans figure out where the bank is. Per the prospectus, the companies still have to fill out their own paperwork. These companies would need to have sizable businesses (particularly by China standards) to get loans of such sizes. They would therefore already have bank accounts and banking relationships. They would have finance departments with multiple employees who could call – and even visit in person – various banks’ loan officers to compare rates and terms. Particularly given that these companies are borrowing at such high interest rates, bankers would likely be lining up out the door to sell them loans, especially when the loans are often secured by", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ef35a42c-9c17-4d2b-9f5e-9891cb502a83", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "(Hope you’re watching your wallet, friend.) — Muddy Waters Research", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-f5d0-745c-bebf-b5b78de96133", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.5, "x": 0.11, "y": 0.89 }, "kind": "source-note", "text": "28 https://www.cnbc.com/video/2011/04/12/dredging-muddy-waters.html", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6dc8851e-20d3-417e-9e38-ab0f2b00053d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.45, "x": 0.11, "y": 0.57 }, "kind": "title", "text": "From Founding to 97% Gross Margin Instantly?", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a3908336-b7fc-4b36-a673-4a73bb5df7f3", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "16a53e76-7b4d-437c-89eb-6e8c7179c03a", "evidence": "The slide explicitly labels the company as a fraud and uses logical arguments to dismantle the business model.", "confidence": 0.9 } ], "arcBeats": [ { "to": 18, "from": 4, "beatId": "9d53cc26-322c-42be-b630-1456141bf8df", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Expose Contradiction", "beatSlug": null, "evidence": "Multiple sections exposing contradictions in CIFS's financials and business practices", "position": 0, "confidence": 0.9, "parentBeatName": null, "parentBeatSlug": null }, { "to": 17, "from": 4, "beatId": "ff490d76-07a0-401e-874a-1e265d193022", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Struggle", "beatSlug": null, "evidence": "Detailed investigation and analysis of CIFS's financials and business practices", "position": 2, "confidence": 0.9, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [ { "to": 16, "from": 15, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "0fa0a6ff-7ec0-4480-90c0-a4a88b7dc604", "evidence": "The document highlights the suspicious nature of CIFS's business practices", "position": 2, "objective": "What are the implications of CIFS's business practices?", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.7, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }