We are short BEKE because we conclude the Company is engaged in systemic fraud, by our estimate, inflating its new home sales GTV by over ~126% and its commission revenues by approximately ~77–96%. We found massive discrepancies between the transaction volumes, store count and agent count reported to investors and the transaction data from our multi-month data collection program from BEKE’s platform. We corroborated these discrepancies by spot-checking our findings through primary due diligence on BEKE’s stores, including field interviews and site visits.
BEKE’s mantra, oft repeated on Company earnings calls, is “doing the right thing, even if it is difficult.” Nothing could seem further from the truth. Put simply, we found massive fraud, including a likely sham acquisition seemingly designed to mask the fraudulent revenues. Our field work found ghost stores, clone stores and undisclosed schemes to inflate revenues by round tripping cash through connected brokerages. Similar to Luckin Coffee, this is a real business with significant amounts of fraud.
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