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Citron, Muddy Waters Clash on Twitter Over Chinese Coffee Chain

An employee prepares an iced coffee beverage at a Luckin Coffee outlet in Beijing.

An employee prepares an iced coffee beverage at a Luckin Coffee outlet in Beijing.

Photographer: Gilles Sabrie/Bloomberg

The Chinese challenger to Starbucks Corp. has found itself in the middle of an unusual debate between two outspoken short-sellers.

Luckin Coffee Inc. sank as much as 27% on Friday when Muddy Waters Capital tweeted that it has a short on the stock after it received an unattributed 89-page report that alleges accounting issues and a broken business model. Less than two hours later, Citron Research defended the coffee chain in a tweet of its own.