Manbang Group denies the short-selling report's accusations of exaggerating and falsifying operating and financial data.

  On January 25 local time, the digital freight platform Manbang Group (NYSE: YMM) issued a statement in response to the company-related report released by the short-selling agency J Capital Research on January 24.

The statement stated that the company firmly denies the allegations in the short-selling report that the company has exaggerated and falsified any operating data or financial data.

  Manbang Group stated in a statement that the short-selling report contained many statements or inferences that were inconsistent with the facts, obviously wrong, and groundless, which showed the agency's shallow understanding of the company's industry and business.

The company believes that the report is worthless and is considering taking appropriate measures to protect the interests of the company's shareholders.

All financial and operational data disclosed by the company are true, and will continue to maintain a high standard of corporate governance and internal control, and will also timely and accurately perform external disclosure obligations in accordance with relevant laws and regulations.

  This J Capital Research short report has 54 pages and focuses on the five parts of Manbang Group.

The first part combines the content of the interview, claiming that Manbang "tripped back and forth" and exaggerating the transaction volume; the second part considers the transaction volume to be too high based on financial data and other public data; On the table, several acquisitions were canceled shortly after the completion; the fourth part is the deterioration of the basic business, forecasting that the value-added tax refund will end, a large number of insider transactions and the weakening of cash flow; the fifth part is other major risks, including insufficient capital in the lending business , regulatory issues and weak internal controls.

  According to the official website, J Capital Research was established in China in 2010. The agency has repeatedly attacked Chinese stocks, and has shorted companies such as Faraday Future, Luckin Coffee, BeiGene,, and Uxin Used Cars.

  Manbang Group is an "Internet + logistics" platform company. According to its official website, its "Yunmanman" and "Huachebang" merged in 2017, and Manbang was listed on the New York Stock Exchange on June 22, 2021.

Manbang Group operates in Guiyang, Nanjing, Beijing, Shanghai, Chengdu and other national multi-centers, and has developed into the largest digital freight platform in China.

  Before the U.S. stock market on January 26, Manbang Group rose 1.5%,

Short sellers claim Manbang trading volume is exaggerated by 6 to 10 times

  J Capital Research believes that the transaction volume of Manbang may be exaggerated by 6 to 10 times.

The report also pointed out that the income and transaction volume disclosed by Manbang do not conform to taxation, commission income or basic logic.

  According to Manbang's financial report for the third quarter of 2022, Manbang achieved revenue of 1.81 billion yuan in the third quarter, a year-on-year increase of 45.7%, higher than previous expectations.

In the third quarter, the net profit attributable to the parent was 390 million yuan, a loss of 180 million yuan in the same period last year.

The company expects total revenue in the fourth quarter to be between RMB 1.79 billion and RMB 1.88 billion, representing a year-on-year increase of approximately 25.2% to 31.5%.

  Among them, in terms of operation, the total transaction volume (GTV) of Manbang in the third quarter of 2022 reached 69.6 billion yuan, a year-on-year increase of 3.5%, and a quarter-on-quarter increase of 5.7%; completed orders reached 33.5 million, a year-on-year decrease of 5.4%, and a quarter-on-quarter increase of 20.2% ; The average MAU of shippers reached 1.85 million, a year-on-year increase of 15.2%.

  The short-selling report also quoted a number of alleged former Manbang executives and former sales staff as saying that Manbang set up a shell company to create "transactions" to increase the transaction volume, and it seemed that the cash would eventually be returned, and there were not many real orders.

  Among them, Manbang invested about 1 billion yuan in Plus Corp, which develops self-driving technology, and Plus Corp claims that its technology has received more than 7,000 pre-orders.

The interview with J Capital found that most of the orders came from the Manbang subsidiary.

Confirmed in Plus Corp's SPAC merger proposal, documents revealed that 6,800 of the 7,000 bookings were from Manbang, were non-binding, and were "pre-ordered".

  The report also pointed out that Manbang's virtual transactions may be created by affiliated companies. Several interviewers said that the company's business is promoted through the Manbang Group's platform. Assigned to the company's own fleet of trucks.

People from these companies sometimes traded through Manbang accounts, but did not create any value for Manbang.

  J Capital Research said that Manbang Group does not have its own fleet and mainly charges independent shippers and truck drivers to join the platform to handle unfixed cargo.

According to agency interviews, the proportion of bulk cargo transportation in truck transportation is not high, not exceeding 10% of China's truck transportation industry, and most shippers have their own trucks or sign contracts with large logistics companies.

  In terms of financial data, the report also stated that there is sufficient evidence that Manbang's GTV is exaggerated.

“Manbang is supposed to pay 9% VAT and then get a tax refund, the account shows a much lower payment. But from the invoice, Manbang paid 9%, so it either pays 21 billion less in 2021 , or overestimate GTV by a factor of 10."

  According to the previous announcement of the State Administration of Taxation, starting from April 1, 2019, the tax rate for general VAT taxpayers selling transportation, postal services, basic telecommunications, construction, and real estate leasing services is 9%.

  Unlike other companies that reported deducting VAT from revenue, Manbang included VAT collected from customers in its revenue, thereby substantially inflating reported sales figures, the report said.

  The report states that if Manbang's GTV is accurate, the difference between its disclosed VAT payment and the VAT fee that Manbang should have paid is almost 10 times.

In 2021, Manbang disclosed a huge GTV of 262.3 billion yuan.

Calculated according to the national official value-added tax rate of 9%, the completed GTV of 262.3 billion yuan must include 23.6 billion yuan in value-added tax.

However, the value-added tax collected in 2021 is only 2.58 billion yuan.

Manbang previously said that the GTV in the report was for fulfilled orders on its platform.

  The report also said there was a significant mismatch between Manbang's intercompany payables and receivables.

"The value of short and long-term intercompany receivables in 2021 was $8.7 billion, however, the corresponding intercompany payables did not come close to matching and offsetting these receivables."

VAT refund phased out?

The report said that it may reduce the profit of Manbang by about 75%

  In terms of acquisitions, the report pointed out that Manbang's acquisition looked very suspicious and was canceled shortly after the acquisition was completed.

To date, $185 million has been written off or written down, with some investments written down months after they were invested.

  On June 13 last year, the General Office of the State Council issued guidance on further promoting the reform of the financial system below the provincial level.

Opinions pointed out that the way of regulating income sharing.

Unless otherwise stipulated by the state, the policy of full retention or incremental return of fiscal revenue for various regions shall be gradually cancelled, and those that really need to be supported shall adopt standardized transfer payment arrangements.

Gradually eliminate improper market intervention and subsidy or rebate policies linked to tax revenue.

The opinion also pointed out that the provincial regulatory capacity should be moderately enhanced.

Provincial-level finance should improve the sharing mechanism for value-added tax credits and refunds below the provincial level, ease the pressure on tax refunds in cities and counties where tax refunds are relatively concentrated, and ensure that tax refund policies are implemented in a timely and accurate manner.

  Industry experts told J Capital Research they expect local tax breaks for trucking to begin phasing out in 2023, the report noted.

The report predicts that in 2023, the value-added tax rebate for truck transportation may be phased out, which may reduce the profit of Manbang by about 75%.

  The report also stated that truck drivers use the Manbang Group’s platform mainly for regional tax arbitrage. If the value-added tax refund for truck transportation is phased out this year, Manbang may lose customers and cause a serious drag on cash flow.

  The report notes that Manbang's VAT arbitrage meant the company had to spend large amounts of cash upfront to pay the government its 9% VAT, while enduring long delays before VAT refunds arrived.

Slow refunds will mean a huge drag on working capital.

The report estimates that Manbang will need an additional 2 billion yuan to cover the 18-month delay.

  The Paper reporter Shao Bingyan