What happened Shares of Chinese education company GSX Techedu (NYSE: GSX) were falling on Monday, after prominent research firm Muddy Waters revealed it had taken a short position in the stock. As of 11:10 a.m. EDT, the stock was down 8%. But it was down 16% in early trading. Even after today's stumble, GSX Techedu stock is still up for the year and easily beating the market. Its year-to-date outperformance might be contributing to investors' jitters. GSX data by YCharts So what In January, Muddy Waters garnered media attention when it shorted shares of Luckin Coffee. It based its short thesis on an anonymous report stating Luckin Coffee's sales numbers were inflated. The claim was disputed on Wall Street at the time, but it turned out to be true. In April, Luckin announced it was investigating the issue, sending shares down more than 70% in a single day. After being proven right with Luckin, investors care what Muddy Waters has to say. Today, Muddy Waters released a summary of why it's short GSX Techedu. Based on its own research, it believes that between 70% and 80% of GSX Techedu users aren't real. Therefore, at least that much of its revenue is believed to be inflated. Muddy Waters also laid out additional ways GSX Techedu's numbers could be worse than reported, including lower average selling prices for its real users and higher expenses for running its business. Image source: Getty Images. Now what It's important to note that Muddy Waters' short positions aren't always proven right. In June 2018, the firm announced it was short TAL Education Group (another Chinese education company) for inflating its profitability. Nearly two years later, the stock is up over 30%. In April, TAL Education stock fell after it reported some fraudulent sales, but this wasn't exactly what Muddy Waters built it short thesis around. Therefore, shareholders of GSX Techedu should still do their own due diligence. Muddy Waters has been proven right before, and its report should be taken seriously. But it's important to weigh both sides of an argument when investing in stocks. 10 stocks we like better than GSX Techedu Inc.When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and GSX Techedu Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of April 16, 2020 Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Luckin Coffee Inc. and TAL Education Group. The Motley Fool has a disclosure policy.Source