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liable for any direct or indirect trading losses caused by any information contained in this report. We have a short interest in Secoo Holding
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Secoo Holding: A Zero.

Secoo Holding Ltd (SECO or the company) has fabricated their financial statements and lied about
their business. We initiate coverage with a price target of $0 and 100% downside as we believe that the
company will be delisted for filing fraudulent financial statements with the SEC.

1) SAIC filings of VIEs Beijing Secoo and Beijing Auction show Company: Secoo Holdings
that SECO has lied in their prospectus and has committed
fraud. SECO primarily conducts their business through two Ticker: SECO
Variable Interest Entities (VIEs). SAIC filings of these
Industry: eCommerce
operating entities show that SECO has inflated their revenue
by over 600% in 2016. Stock Price as of
2) SECO is likely involved in smuggling. Secoo does not show 10/30/2017: $7.10
any import records despite claiming to sell primarily
imported goods. A key competitor was arrested for Market Cap: $364mm
smuggling just a few months ago. If SECO were conducting
Daily Volume: 895,572
actual business, they would have to import a substantial
amount of goods for sale. The lack of import records shows (3 month avg.)
not only that the company is lying about their financial
statements but that it is likely involved in smuggling. Price Target: $0
3) SECO customer disclosures are illogical and show likely false.
SECO also uses bots and paid pumpers to give the
appearance of online activity. Screen shots from app store
show use of bots to fake reviews.
4) Auditor resignation and declining employee count despite
claimed increase in sales. SECO has significantly reduced
headcount despite growth claims. SECO dismissed auditor
PWC without saying why and switched the much more fraud-
friendly KPMG in November of 2016. Disclosure in the
prospectus shows a 27% decrease in headcount despite
growth claims.

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Introduction

Secoo Holding Ltd conducted an IPO on September 22, 2017, at $13 per share. As we are now several
years into a bull market cycle, and the Chinese ADR index is up 56% YTD, promoters and bankers are
back to bringing fraudulent Chinese companies back to capital markets. In the prospectus filed with the
SEC, SECO relied heavily upon claims made by Frost & Sullivan that it is Asia's largest online integrated
upscale products and services platform as measured by GMV in 20161. Frost & Sullivan is no stranger
to providing falsified market studies which appear to support claims made by fraudulent companies.
Frost & Sullivan most recently and notably provided research that supported claims by Tianhe Chemical
(Tianhe) which have now been proven fraudulent. This was an $8 Billion fraud perpetrated in Hong
Kong, and is currently being investigated by the SFC. Investors that followed Frost & Sullivans
conclusions were completely wiped out. The history of Frost and Sullivan shows that no investor should
rely on any research provided by them.

The reality is that the online vertical luxury goods business in China is incredibly competitive and has
been struggling2. Luxury brands do not want to diminish their brands through lower pricing and rarely
cooperate with vertically integrated retailers. The preferred manner by which they do business is to set
up their own shops on Tmall or JD.com and control pricing. As well, well off Chinese are able to travel
abroad freely or to Hong Kong and Macau in order to purchase luxury goods. It makes no intuitive sense
that SECO could actually succeed in this industry in particular competing against internet giants like
Alibaba and JD. Closer inspection shows that the company is simply lying in their financial statements.

1
https://www.sec.gov/Archives/edgar/data/1633441/000104746917005397/a2232448zf-1.htm
2
https://xueqiu.com/8919007816/90791114

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SAIC Files Show Evidence of Fraud

SAIC financials for SECOs largest operating subsidiaries show substantially lower revenues that
reported:

Beijing Secoo 2015

3
Beijing Secoo 2016

4
Beijing Auction 2015

5
Bejing Auction 2016

According to the SECO prospectus, it conducts its business through VIEs. This is a common arrangement
that is familiar to all investors in Chinese companies. A company cannot conduct business over the
internet in China without an ICP license, and foreigners cannot hold shares in a company with an ICP
license.

Page 127 of the prospectus clearly explains that SECOs online business is conducted through these
licensed entities:

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Beijing Secoo holds the license for the main website while Beijing Auction holds the license for the
auction business:

According to the Propsectus, SECO claims to have online revenue of RMB1,277mm (US$192mm) in 2015
and RMB2,273mm (US$342mm) in 2016. See below form the prospectus:

Because of the arrangements and regulations described above, this online revenue must have been
recorded by the two VIEs. We obtained SAIC files for these two subsidiaries (shown above) and we
discovered that SECO has lied in their IPO prospectus:

2016
x1000 RMB Beijing Secoo Beijing Auction Total Prospectus Difference
Revenue 316,165 3,746 319,911 2,272,701 610%

x1000 RMB 2015

Revenue Beijing Secoo Beijing Auction Total Prospectus Difference
531,940 1,160 533,100 1,276,844 140%

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As you can see, actual revenues for the two entities are a small fraction of what the company claims.

2016
x1000 RMB Beijing Beijing Shanghai Total VIEs Prospectus Difference
Secoo Auction Secoo
Revenue 316,165 3,746 434,291 754,202 216%
2,386,316
Net Profit -122,772 -3,132 -42,323 -168,228 310%
(41,007)

2015
x1000 RMB Beijing Beijing Shanghai Total VIEs Prospectus Difference
Secoo Auction Secoo
Revenue 531,940 1,160 285,387 818,487 1,568,815 92%

Net Profit -171,420 31 -67,932 -239,321 -199,803 20%

SAIC filings not only show that the VIEs are much smaller but that revenues are shrinking substantially.
Desperate because their business was failing, SECO has turned to committing fraud and conducting an
IPO to hide their failure.

Smuggling and No Import Records

Because SECO claims to sell luxury goods, a substantial amount of their inventory must be imported.
See below form page 19 of the prospectus:

However, SECOs subsidiaries and VIEs show NO records of imports at all. It is likely that for the small
amount of items it does sell SECO is smuggling goods. In fact, the owner of a large competitor luxury
goods site xiu.com was recently arrested for smuggling:

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 Source: http://tech.sina.com.cn/i/2017-08-17/doc-ifykcypp8426081.shtml

The fact that we are unable to locate any import records of the subsidiaries means that SECO is likely
smuggling the goods they are reporting in SAIC files just like their competitor.

9
False Claims about Customer Activity

According to the prospectus:

SECO claims to have 15.1 million members but only 300 thousand active customers. Additionally, they
claimed that they processed 953,700 orders. Looking at the above, this means that 51% of the active
users only ordered once, meaning orders attributable to one-time use would be 953,700
(51%*300,000) = 800,700 orders from repeat customers. If the prospectus is to be believed, that means
147,000 people accounted for over 800,00 orders. Based on what the company claims for average order
size, that means there must be 147 thousand people ordering at least 5 times a year for more than
3,500 RMB per order. This is highly unlikely. These big spenders could easily purchase goods outside of
China.

In order to pass due diligence, we believe that SECO has faked its member number. As we can see in the
app reviews, there are paid pumpers and bots that are made to appear like users. This comment is
particularly telling:

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 The red box highlighted says long
press the dotted box to copy
comment content. The pumper is
actually so lazy/clumsy that s/he
didnt even bother to delete the
copying instructions for pumping!
Readers who can read Chinese can
also easily see how fake the other
comments are.

Other Red Flags

Declining headcount in the prospectus contradicts the narrative of a growing company:

11
Any company that is supposedly growing at such a rate would need to increase the support staff to
handle order volume, traffic, and customer inquiries. This shows that SECO is likely lying about their
growth. By contrast, Alibaba increased headcount by 37% in the year ending March 31, 20173.

Page 101 of the prospectus shows that before deciding to substantially inflate revenue in preparation
for an IPO, SECO dismissed PWC and hired KPMG. No reason was given:

On October 31, 2015, we dismissed PricewaterhouseCoopers Zhong Tian LLP, or

PricewaterhouseCoopers, as our independent registered public accounting firm, and, on November 23,
2016, engaged KPMG

KPMG has been associated with numerous China frauds4, and so we believe that SECO hired them in
order to find someone more gullible.

Valuation

SECO is a loss making company perpetrating accounting fraud. As we have no reliable financial
information other than SAIC files that show a tiny loss making business, we believe that the company
will be delisted and has a value of $0 per share, downside of 100%.

3
Page 183 - https://www.sec.gov/Archives/edgar/data/1577552/000104746917004019/a2231121z20-f.htm
4
https://www.reuters.com/article/us-china-accounting/china-accounting-scandals-put-big-four-auditors-on-red-
alert-idUSTRE75N19J20110624

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Disclaimer:
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