J Capital is short Full Truck Alliance (YMM)

A round trip for investors?

  • YMM has the hallmarks of notorious Chinese round-tripping schemes. We believe transactions might be overstated by 6-10X.
  • Former salespeople have told us they set up shell companies to churn bank loans back and forth. These boomerang transactions would create the appearance of rising transaction volumes. The cash ultimately appears to get routed back.
  • The reported revenue and transaction volumes don’t line up with tax payments, commission revenue, or basic logic. 
  • We struggle to reconcile “Gross Transaction Value” with YMM’s revenue.
  • YMM’s acquisitions look highly suspicious. $185 million has been written off or impaired to date, with some investments impaired just months after they were made. We believe these write-offs potentially fill out and complete the round tripping.
  • We expect a phase-out of VAT rebates for trucking this year. Interviewees say they believe this will happen and that VAT will be unified by 2024. That would reduce gross profit by about 75% and create a heavy drag on cash flow. We think the margin degradation that would result from a phase-out has not been reflected in analyst estimates.
  • We think some of the short-term assets could also be inflated as a result of round-tripped cash. Short-term assets include ¥3.8 billion held by subsidiaries and VIEs in China.
  • Insider sales ahead of U.S. HFCAA accounting reviews by the PCAOB are a key red flag. The PCAOB says it has gotten access to inspect Chinese firms for the first time ever.
Photo of what we believe are shell companies at the YMM Guiyang headquarters. Photo by J Capital
Check out Anne's brief explanation of YMM on CNBC

YMM captures just a small portion of China's trucking market.

  • Full Truck Alliance is a platform that connects businesses in China that need to ship small cargo lots with truckers who have extra space. It listed on the NYSE in June 2021 with the ticker YMM. 
  • YMM aspires to be the Uber of China’s trucking industry. Its model is similar to that of XPO Logistics, Inc., except it doesn’t have its own fleet. It collects fees from independent shippers and truck drivers who join the platform. 
  • YMM’s principal value to truckers is getting the best tax rate offered across China’s territories. We believe this business is deteriorating.
  • Formers tell us many YMM matches are done manually. The software appears rudimentary.
  • YMM handles odd lots, but this type of loose freight is not a big portion of trucking - no more than 10% of China’s trucking industry, according to our interviews. Most shippers have their own trucks or contract with big logistics companies. 
  • YMM collects a small listing fee from shippers looking for truckers, and it has recently started to collect a commission (1-3.6%) on some transactions. Other miscellaneous services include loans for gas and tolls, selling insurance, trading in oil, and developing logistics parks. 

FEATURED REPORTS

July 22, 2022
January 11, 2021

LKE ASX

Remote Chance

​Lake Resources (LKE ASX) “Lake” is one of several lithium explorers planning to use an unproven direct lithium extraction (DLE) technology to remove lithium from brine. If Lake can get the DLE technology to work then it plans to build a $1 bln processing facility in a remote location in the Andes.
Lake is claiming to produce “cleaner lithium.” We believe, however, DLE will still use large amounts of water and produce toxic waste. Lake has failed to get an operational pilot plant on site three years after promising it would. Lake insiders have successfully sold $8.1 mln in stock in the last year. Lake granted 41.5 mln options to financial institutions that published favorable research on the company. Insider share sales have followed a pattern of Lake announcement, followed by favorable research, stock price rise, and then insider sales. Investors had been expecting the delivery of the pilot plant to site and a definitive feasibility study (DFS) by the end of June. Instead, they got the resignation of the CEO and Managing Director Steven Promnitz without a replacement.

BTBT US

“The Company was not able to reach Mr. Liu.” 

With key executives in jail or on the lam for having bilked Chinese investors out of $42 mln in a fraudulent P2P business, Bit Digital (BTBT) has moved on to a fake crypto currency business. We will show that the assets probably do not exist, and the business is designed to steal funds from investors.
October 7, 2021

FFIE

Move Over, Lordstown:
at Faraday, EV Stands for "Embezzlement Vehicle"

​We don't think Faraday Future (FFIE), an EV SPAC, will ever sell a car. So far, it's nothing but a bucket to collect money from U.S. investors and pour it into the black hole of debt created by its founder, China's best-known securities fraudster, Jia Yueting.
June 24, 2021

CDXC US

An Oceans 11 of stock promoters
May 28, 2020

NG TSX

Pipe Dream
December 18, 2020

CBAK US

The Undead: Why CBAT Has Zero Value
IAfter months of examining ChromaDex (CDXC), we have come to the conclusion that this company, which sells a health supplement called Tru Niagen, is pure hype, dished up by an Oceans 11 of stock promoters. CDXC promotes its single product with iterative press releases that boost share price long enough for insider sales before the vaunted advantages contained in those press releases quietly disappear.
​The SEC has labeled the team behind CDXC “micro-cap fraudsters” who manipulate share prices and then “dump” the stock.

​Not only is the management team dubious, but so is the auditor. CDXC uses Marcum LLP, which the PCAOB says is riddled with deficiencies.
The latest promote is a Walmart distribution deal, announced twice, in March and in June, for full effect. The company frequently announces deals
that end up producing virtually no sales. 
After reviewing the company’s reported acquisitions and dispositions since 2012, we believe they have provided negative real value to shareholders but payoff to insiders. 
For the last 15 years, we believe NovaGold’s management team has systematically misled investors with subjective presentation of information about a deposit so remote and technically challenging that the mine will never be built. During that time, management has been treating this 12-person concept company like an ATM, awarding themselves base salaries that rival those of the CEOs at Newmont and Barrick and total compensation packages comparable with those at Rio and BHP. If the information from the company’s feasibility studies were presented in a more honest light, investors would understand that the Donlin deposit, of which they own 50%, is not feasible to put into production at any gold price.

We think management misleads investors with custom metrics designed to deceive, directing investors to presentations which claim the deposit will require $6.7 bln in capital, however, the feasibility study clearly shows this number is $8 bln (already, we believe, far too low). The proposed natural gas pipeline central to powering the project is dead on arrival. The terrain around the Donlin deposit is among the most inhospitable on the planet. Based on recent cost-per-inch/mile data we obtained from ICF, we show the costs of the pipeline (if someone were even to attempt to build it) are likely in excess of $3 bln, two to four times higher than management’s previous forecast. One engineer we spoke with who worked on costing the pipeline told us he doesn’t  know of any engineering company that has the experience to build such a complex pipeline.

Management has a long history of over-promising. The Galore Creek project, once promoted as the company’s key asset, was quietly sold at a loss in 2018 after revised capex estimates increased by 5x.

​In short, this is a stock promote, not a mining plan.
CBAK Energy Technology Inc. (CBAT) represents the barely re-animated corpse of CBAK, a Chinese reverse merger that lost all its manufacturing assets to default in 2014. In 2015-16, CBAT raised $113 mln from investors to build new factories—and, we will show, appears to have simply taken a lot of that ...
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​Cartoon by Johannes Leak
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