A report from a small research house appears to have finally awakened the world to the reality behind the Chinese Internet comedy known as Qihoo (NYSE: QIHU), which has steadily lured in investors — achieving a ridiculously high valuation — since its IPO in March. The research report by Citron sparked a sell-off in Qihoo shares, which tumbled 10 percent on Tuesday during a turbulent session that saw the broader indexes also fall by more than 2 percent. So, what exactly did Citron say that got everyone so spooked and prompted Qihoo to issue a “clarifying” press release? (Qihoo announcement) I haven’t seen the actual report so can’t comment in too much detail. But based on other media reports and Qihoo’s own announcement, the Citron report essentially called into question many of Qihoo’s claims about the size of its user base and the company’s scale as a major Chinese Internet player. Citron further commented that Qihoo’s stock price should be around $5 per share, or about a quarter of its value of $20 per share at the beginning of the Tuesday New York trading day. (Chinese article) Bloomberg data lists Qihoo’s forward price-to-earnings ratio at a massive 900 times, which seems overstated although I’ve read that its PE is the largest of all China Internet companies. All of this doesn’t surprise me, as I’ve repeatedly questioned Qihoo’s credibility, as the company has been the subject of a number of high profile lawsuits, most of which it has lost, though with little financial consequences. (previous post) I honestly don’t know why investors have been so excited about the stock, and wouldn’t be surprised if this unethical company has engaged in some manipulative activity to get its valuation so high even compared with leaders like Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700). All that said, this new report looks like it may finally awaken investors to all the questions surrounding this company, and could well mark the beginning of a broader decline to Citron’s $5-per-share target or even lower.
Bottom line: A report by a small research house has finally awakened investors to the many questions surrounding Internet firm Qihoo, whose stock could drop steadily for the rest of the year as a result.
Related postings 相关文章:
◙ Qihoo Goes to War With Mobile Browsers 奇虎360加强移动互联网布局
◙ Qihoo Loses Yet Another Lawsuit, But No One Cares 奇虎败诉不足为戒
◙ China Legal System Takes Bite Out of Tencent’s Qihoo Lawsuit 中国法律体系让奇虎在与腾讯的官司中免受重大损失
giants, Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU). Investors are clearly getting the message here, that no one needs to fear lawsuits in Chinese courts, with Qihoo shares actually rising 7 percent in New York trading after results of this latest lawsuit were announced. If China doesn’t add some teeth to its legal system soon, it could face the very real danger that others in China’s private sector will begin to engage in similarly unethical behavior to get an edge over their rivals, causing the entire business climate to sink into chaos.
