Short Sellers Target China in Year End Assault 做空抛盘年底将矛头对准在美上市中国企业

By newsdoug on November 23, 2011

Short sellers launch year-end assault on China firms The US Thanksgiving holiday is just around the corner, but some top US-listed China firms have little to be thankful for these days, following a round of short-seller attacks against them that have claimed Focus Media (Nasadaq: FMCN) as their latest victim. I do find it a bit strange that the attacks, which seemed to reach a peak during the summer at the height of the confidence crisis against US-listed China firms, have returned now, leading me to suspect that these short sellers are trying to earn some quick bucks before the year ends. This latest round of attacks began 3 weeks ago, when a report by a small brokerage named Citron questioned claims by Internet security firm Qihoo (NYSE: QIHU) about the size of its user base, saying the stock should be valued at about a quarter of its current level at that time. (previous post) Last week, another report took aim at education services firm New Oriental (NYSE: EDU), this time questioning some of the firm’s accounting. (previous post) The latest attack aimed at Focus Media came from the notorious short selling specialist Muddy Waters, again calling into question some of the company’s claims about the size of its market. (English article) Focus share plunged 40 percent the day the report came out, while Qihoo and New Oriental shares are both down around 20 percent since the reports attacking them came out. Knowing what I do about Chinese companies, it appears that the short sellers are taking aim at companies that have engaged in somewhat questionable business practices in the past and don’t enjoy the most stellar reputations among their peers, perhaps calling into question their broader credibility and making them more vulnerable to this kind of attack. I won’t get into specifics, but suffice it to say that some of the companies in this latest round of attacks have mounted their own guerrilla-style attacks in the past, and are also known for their fondness for exaggeration. Given that this new wave of attacks does seem to be aimed at making some fast profits at the end of the year, I’d say to look for a few more before 2011 ends, with companies with less-than-stellar reputations especially vulnerable.

Bottom line: The latest round of short selling aimed at US-listed Chinese firms seems to be taking aim at companies with spotty reputations, with more similar attacks likely to come.

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