The bears aren’t sleeping right now. Indeed, short sellers see ample opportunity for shorts, with several high-profile reports released recently. Today, one short report garnering attention revolves around ZTO Express (NYSE:ZTO), culminating in a (surprisingly) relatively muted decline of around 1% in ZTO stock at the time of writing.

Interestingly, ZTO may be the $20 billion company many investors haven’t heard of. Facetiously referred to as China’s “best-in-class logistics company” in this short report, ZTO is a significant player in the Chinese logistics space.

That said, short seller Grizzly Research believes this company’s financials are fraudulent and has lobbed allegations of insider theft in its short report.

Let’s dive into what was alleged and what investors should make of this news.

ZTO Stock Sinks on Short Report

In Grizzly’s research report, the company notes a few allegations that should be broken out separately.

First, the short seller believes that ZTO’s superior margins result from falsified financial statements. That’s partly because its Chinese public filings differ substantially from U.S. filings.

Additionally, the company notes that ZTO’s headcount and employee costs are likely twice as high as those reported. Capital Expenditures have also been called unruly, with the company’s franchise model also called into question.

Overall, this short report highlights some potential severe accounting discrepancies that investors may want to be concerned about. As a U.S.-listed company, American investors rely on the information published by the company to make investment decisions. Thus, it’s unclear to what extent a Securities and Exchange Commission (SEC) investigation will follow this report. However, the allegations are indeed serious.

On the other hand, Chinese companies have proven to be easy targets for short sellers of late. Opaqueness concerning accounting and reporting differences between the two countries has been a problem for some time. And while there may be truth to the allegations, it’s unclear to what extent investors are buying into this thesis today, given the muted move.

Personally, I think ZTO stock is one that investors may be best served to stick on the sidelines with for now. This company wasn’t on my watch list, but it is now. I’ll be monitoring the company for updates moving forward.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.