Beijing (PingWest)—Joyy, a NASDAQ-listed Chinese live-streaming company, is being shorted due to fraud, Muddy Waters Research announced today.
The short-selling statement came after Joyy announced a robust Q3 2020 financial report and the plan of selling its domestic business to the Chinese search engine giant Baidu.
The short-seller said that after a year-long investigation, YY Live, the domestic business of Joyy, is proven to be 90% fraudulent.
"It was clear to us from early on that YY Live was almost entirely fake...The purportedly independent channel owners are largely controlled by YY in order to facilitate continuous sham transactions," the company wrote in its statement. "The legions of benefactor fans are almost entirely bots operating from YY’s internal network (~50% of YY Live gift volume), bots operating from external bot farms, and performers roundtripping gifts to themselves. We conclude that YY Live is ~90% fraudulent."
Headquartered in Guangzhou, Joyy's business is mainly composed of two parts: YY, a hybrid of voice, live streaming, short video entertainment, game, and education businesses, etc. in the domestic market, and Bigo for the global markets.
As of September, YY Live claimed to have 41 million monthly active users in China. Despite its early start in live streaming, YY's growth has slowed in recent years and it has lost customers to rivals including ByteDance's Douyin and Tencent-backed Kuaishou.
Muddy Waters also believes that Baidu's $3.6 billion acquisition of Joyy's domestic business is very unreasonable.
Meanwhile, the institution, which is well-known in China for shorting notorious Luckin Coffee and leading to its delisting, said "Joyy's international live-streaming business, Bigo, seems barely more real."