On Nov. 16, Muddy Waters Capital disclosed a short position in dLocal (NASDAQ: DLO). When you short a stock, you're betting against it, and you make money when the stock price falls. When a firm like Muddy Waters makes its position known, many investors get out quickly, which can cause the price to drop.

And drop it did. dLocal shares fell more than 50% the day the report was released. Is this overreaction? Or is there something to Muddy Waters' position? Let's find out.

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Source Fool.com