Chapter 38: Huishan Dairy: Got Stock?

China Huishan Dairy Holdings Co Ltd. was accused in December, 2017 of accounting fraud and embezzlement by a US-based short selling investment firm named Muddy Waters. The accusations were based on on-the-ground investigations into the integrity of Huishan’s financials. Not a few months after Muddy Waters published their findings, Huishan’s stock price dropped 85% in 90 minutes. This case analyzes Muddy Waters’ research findings, Huishan’s operational inconsistencies and suspicious executive behavior, Huishan’s response to Muddy Waters’ research, and the morality of fraud and embezzlement.