Muddy Waters made its name as a short-selling firm that exposed accounting trickery at publicly-traded Chinese firms. On March 17, the firm took aim at a new target: It accused SoFi, known for home and student loans, of a host of book-keeping shenanigans designed to enrich top executives at the expense of shareholders. These are the sort of accusations that, if true, could tank a company’s stock. But so far the market doesn’t appear to be buying Muddy Waters’ latest tale.
The short-seller set out its allegations on March 17, blasting out a report to journalists and social media that claimed SoFi had not actually sold a $312 million loan package but kept it on the company’s books with a sleight-of-hand financing arrangement. The Muddy Waters report also alleges that SoFi has been assigning the wrong discount rate to its student loan portfolio—essentially overvaluing it—as well as understating its exposure to loans in default.
