It’s summertime and that means the short selling sharks have come out in search of new prey, making fresh attacks on PC giant Lenovo (HKEx: 992) and real estate braggart Evergrande (HKEx: 3333) in a bid to capitalize on lingering investor doubts about Chinese companies’ accounting practices. Both companies saw their shares tumble late last week after negative reports came out, with Lenovo shares shedding 11 percent while Evergrande fell as much as 18 percent.
Tag Archives: Qihoo 360
News Digest: May 23, 2012 报摘： 2012年5月23日
The following press releases and media reports about Chinese companies were carried on May 23. To view a full article or story, click on the link next to the headline.
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◙ Microsoft’s (Nasdaq: MSFT) MSN China to Launch E-Commerce Business (English article)
◙ Qihoo 360 (NYSE: QIHU) Reports Q1 Unaudited Financial Results, Appoints Co-CFO (PRNewswire)
◙ Nissan (Tokyo: 7201) Aiming For 10 Percent of China Luxury Car Market (English article)
◙ China 3G Users Reaches 159 Mln, New Subscribers Hits New Low in April (Chinese article)
◙ Camelot Information Systems (NYSE: CIS) Announces Unaudited Q1 Financial Results (PRNewswire)
Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？
An important trial has just begun in southern Guangdong province, testing China’s young anti-monopoly law and its legal system in a case that could spell big headaches for leading Internet firm Tencent (HKEx: 700). Analysts also point out the case could have a domino effect for other areas where a single company dominates the Web, with online search leader Baidu (Nasdaq: BIDU) perhaps the most vulnerable to a similar lawsuit. But let’s look at the Tencent case first, as that’s the main point here. Perhaps appropriately, the case is being bought by Internet software company Qihoo 360 (NYSE: QIHU), a seasoned veteran with litigation in China, having been sued numerous times by others, including Tencent, and also filing numerous lawsuits of its own against rivals. This latest case has Qihoo suing Tencent for monopolistic practices in the instant messaging space, claiming Tencent’s wildly popular QQ service has a virtual lock on the market. (Chinese article) The case, which began on Wednesday morning，has Qihoo seeking 150 million yuan, or about $24 million, in damages. Chinese courts rarely award that much money due to legal restrictions, but even if they did such an award would be trivial to a company like Tencent that has a market cap of $56 billion and a huge cash pile. Of course the much bigger threat is that the court will determine that Tencent does indeed have an instant messaging monopoly, which it has used to quickly gain dominance in other Internet spaces such as online games. From my perspective, Qihoo’s case does indeed look convincing, as Tencent currently controls more than 70 percent of the instant messaging market. I personally don’t use QQ, but in my experience the only other platform that has any users at all in China is Microsoft’s (Nasdaq: MSFT) MSN, whose service is basically just a copy of its global product and is far less popular among Chinese users. A court ruling against Tencent would be interesting for a number of reasons, all of which would obviously be bad for the company. Qihoo and others are clearly interested in seeing the court order Tencent to de-link QQ from its other initiatives, as that would seriously hamper the company’s ability to take advantage of its massive instant messaging user base to quickly develop into other areas like search, online video and e-commerce. But the court, if it rules against Tencent, should also take steps to break its instant messaging monopoly, which is what the anti-monopoly rule was designed for. Of course, if the court rules against Tencent the next major target would be Baidu, which also controls more than 70 percent of China’s search market, the legal definition for a monopoly. Accordingly, China Internet watchers and investors should be paying close attention to this case, which could have big implications for both Tencent and Baidu stock.
Bottom line: Tencent will suffer a big setback if a court rules it has a monopoly in instant messaging, potentially paving the way for a similar lawsuit against Baidu.
Related postings 相关文章:
◙ Tencent Search: Baidu Beware? 腾讯搜搜成功关键依赖创新
◙ Search Wars Heat Up With Latest Anti-Baidu Moves 中国网络搜索战升温
Overseas China Stocks on Hold, Waiting for Catalyst
Overseas listed Chinese stocks have entered a sort of holding pattern these last few weeks, with investors neither embracing nor dumping them as the market waits for a catalyst to give some direction. A recent scathing Forbes report on security software maker Qihoo 360 (NYSE: QIHU) has done little to dent that company’s stock, reflecting an ebb in investor skepticism that battered such shares last year. (previous post) But the flop of the first IPO this year by a Chinese firm in the US, Vipshop (NYSE: VIPS), also shows investors are far from willing the embrace these stocks again. The needed new catalyst could lead the market either way, depending on what it is. Famous short seller Muddy Waters is hoping to provide that catalyst to lead the group lower, saying it will issue a new report in the next few weeks on several Hong Kong-listed China stocks. (Chinese article) But a blockbuster IPO in either Hong Kong or the US could lead the market higher if the right company emerges to rekindle investor interest in the China growth story. These last few weeks have been full of mixed signals, both on the plus and minus side for this group of entrepreneurial firms whose shares were hammered last year by a series of accounting scandals that undermined the entire sector’s credibility. Negative sentiment led to a halt in new overseas listings dating back to last summer, when a disastrous IPO for online video sharing site Tudou (Nasdaq: TUDO) sent the market into hibernation. Vipshop, a money-losing online discount retailer, tested the waters to see if sentiment had improved last month by making the first IPO by a Chinese company in the US for more than half a year. Unfortunately, it discovered investors were still highly skeptical, as its shares priced below their previously indicated range and then fell another 15 percent on their trading debut. (previous post) Its shares continued to fall after that, and now trade at about two-thirds of their IPO price. But then weeks later, Forbes issued a scathing report on Qihoo 360 questioning a number of its accounting practices and implying that its auditor, Deloitte, might resign the account later this year. That report followed a similar one late last year by a small research house named Citron, whose motives were more obvious due to its status as a short seller. Despite both reports, however, Qihoo shares have remained remarkably stable in their current range, indicating investors aren’t as willing to believe negative news as they were last year, when new short selling reports were coming out almost weekly. So, what exactly is the market waiting for? In my view, it wants a clear signal one way or the other on the China market’s growth potential and the accounting issue. Muddy Waters founder Carson Block clearly wants his firm to be a catalyst in the negative direction by saying he will soon issue a report on Hong Kong-listed Chinese firms that will presumably show more problems. At the same time, a solid IPO by a good Chinese firm could easily attract investors back to the space if a good candidate comes along. That would mean China would have to find a company that is posting both strong double-digit revenue growth and is also profitable, with the profits being especially important for investors wary of buying into money-losing companies. Such companies do exist, with e-commerce leader Alibaba being the most notable example. Unfortunately, Alibaba has shown no signs of making an IPO anytime soon, and other companies with a similar profile are far from plentiful. The handful of other companies that have filed for US IPOs so far this year, including car rental firm China Auto and online literature firm Shanda Cloudary, are both losing money despite their strong growth potential, meaning neither is likely to provide the right tonic the market needs to rekindle positive sentiment. I would bet the Muddy Waters’ report will do little to further undermine investor confidence, though a resignation by Deloitte or another major auditor from a big Chinese company could send the market back into a tailspin. In the meantime, investors will be waiting for the arrival off a white knight like Alibaba to make an IPO and breathe new excitement into the market — something also unlikely to happen until the second half of the year at earliest.
Bottom line: Shares of overseas listed Chinese stocks are likely to remain in a state of limbo until a major catalyst comes, either in the form of a new accounting scandal or a blockbuster IPO.
Related postings 相关文章:
◙ Qihoo: The Next Accounting Victim? 奇虎360：下一个会计丑闻受害者？
Confidence Crisis Easing For US China Stocks 中国概念股信任危机缓和
While it’s never too smart to call a major market turnaround, growing signs are emerging that last year’s confidence crisis for US-listed China stocks may have finally turned a corner, with a strong rebound on the horizon if the broader market remains healthy. The first 2 months of the year have seen several positive developments for Chinese stocks in New York, following a disastrous 2011 that most would rather forget as their shares were pummeled by a series of accounting scandals that undermined the entire sector. Sensing that the worst of the crisis is over, 3 Chinese companies have filed for new US listings in the last few weeks, betting that investors will once again be interested in the China growth story. At the same time, short sellers and lawyers who seized on the crisis to make quick bucks have found far less success in some of their most recent attacks, indicating investors are once again giving Chinese companies the benefit of the doubt now that many more questionable firms have been de-listed. The nascent return of confidence is most evident in the share prices for many US-listed Chinese firms, some of which fell by 50 percent or more last year at the height of the crisis that began with attacks on 2 names, financial services company Longtop Financial and timber firm Sino-Forest. Both companies saw their shares tumble after short sellers questioned different aspects of their accounting, and Longtop was ultimately de-listed. Since bottoming out in mid December, shares of many industry stalwarts that were dragged down in the crisis have posted a strong recovery, with Internet search leader Baidu (Nasdaq: BIDU) and top web portal Sina (Nasdaq: SINA) both up about 20 percent since mid-December. Even smaller names have joined in the rally, with social networking site Renren (NYSE: RENN) and online video site Youku (NYSE: YOKU) both up by 30 or more. Equally significant has been the failure of a number of short seller attacks, which netted big bucks for companies last year. Muddy Waters, whose name became synonymous with the attacks after its successful assault on Sino-Forest last year, has found much less success with a more recent attack on Focus Media (Nasdaq: FMCN). Focus shares initially fell sharply after Muddy Waters questioned some of its data late last year, but have rallied sharply since then and are now close to their pre-attack levels. A similar attack late last year on security software firm Qihoo 360 (NYSE: QIHU) has also failed to convince investors, with the company’s stock now trading near pre-attack levels after initially falling more than 10 percent. At the same time, a series of recent investor lawsuits designed to seize on a drop in the share price of IT outsourcing firm Camelot Information Systems (NYSE: CIS) has also failed to dent the company’s stock price, again indicating investors may feel the worst is past and these Chinese companies are now more trustworthy. As the confidence creeps back, a small trickle of Chinese companies have decided to test their luck with the New York IPO market. Car rental firm China Auto was first out of the gate when it filed for an offering in January, ending several months with no major new Chinese listings. It was followed this month by e-commerce firm Vipshop and Shanda Cloudary, which initially filed for an IPO last year but had to pull the offering due to poor investor sentiment at the height of the crisis. The real test of whether the worst is really past will lie in the weeks ahead, as these 3 offerings go to market and meet with either investor interest or more skepticism. I personally think China Auto could do well, though the 2 Internet offerings could meet with more tepid interest as both are still losing money. Still, if these 3 can post even modest success, which looks like a strong possibility, it could signal the crisis has truly turned the corner, meaning a solid rally may be in store for these stocks for the rest of the year.
Bottom line: Growing signs are emerging that the confidence crisis for US-listed China stocks may be over, with 3 upcoming IPOs providing a strong test of a turning point for the battered sector.
Related postings 相关文章:
◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划
◙ Citron Keeps Up Qihoo Assault 香橼继续攻击奇虎
◙ Sharks Continue to Circle China Stocks 在美上市中国企业将持续面临做空和法律诉讼压力
News Digest: February 23, 2012 报摘： 2012年2月23日
The following press releases and media reports about Chinese companies were carried on February 23. To view a full article or story, click on the link next to the headline.
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◙ Facebook Recruiting Chinese University Software Students – Sources (Chinese article)
◙ Noah (NYSE: NOAH) Obtains a Mutual Fund Distribution License in China (Businesswire)
◙ The New York Times (NYSE: NYT) Launches Monthly Science Magazine in China (Businesswire)
◙ Qihoo 360 (NYSE: QIHU) Reports Q4 and Full Year Financial Results (PRNewswire)
◙ Wrestling Scion Joins Disney (NYSE: DIS) In The Ring In China (English article)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
Sharks Continue to Circle China Stocks 在美上市中国企业将持续面临做空和法律诉讼压力
The year of the Rabbit may be one that many US-listed Chinese companies would rather forget, and now it’s looking like the Year of the Dragon may offer little relief, as short sellers and class action lawyers continue their assaults. In the latest news, Muddy Waters, whose name became synonymous with short selling attacks on US-listed Chinese firms last year, has renewed its recent attack on Focus Media (Nasdaq: FMCN), while a law firm is putting out a call for investors to join its pending class action lawsuit against information technology software maker Camelot Information Systems (NYSE: CIS). Let’s look at Focus Media first, which has always been a slightly controversial company for various reasons, making it an easier target for short sellers like Muddy Waters that try to raise doubts about such companies’ accounting and other strategic issues to pressure their share prices. Muddy Waters first raised doubts about one of Focus Media’s transactions that looked unrelated to its core outdoor advertising business last year (previous post), and now has issued a new report questioning the size of its LCD screen advertising business. (Chinese article) This kind of repeated attack looks similar to another assault on a similarly controversial company, Qihoo 360 (NYSE: QIHU) by another small short seller, a company called Citron, and I suspect in both cases each short seller has bet big against its target and could lose big money is the share prices don’t come down some more. In the end I wouldn’t be surprised to see both short sellers lose big money on these bets, though not before both Qihoo and Focus suffer damage to their reputations. Meantime, a law firm is putting out a final call for plaintiffs to join its planned class action lawsuit against Camelot over a big drop in its price last year, which the law firm blames on misleading information put out by the Chinese firm. (law firm announcement) We’ve already seen a few similar lawsuits filed against US-listed Chinese firms after many saw their stocks drop dramatically last year amid a series of accounting scandals that undermined the entire sector’s credibility. In the end, this kind of lawsuit will probably result in a settlement, costing Camelot millions or even tens of millions of dollars. But over the longer term these lawsuits are likely to be relatively insignificant for larger companies like Camelot, though some smaller firms that come under similar attacks could ultimately go bankrupt and be forced to de-list.
Bottom line: Short seller and class action lawsuit attacks against US-listed Chinese firms will continue into the first half of 2012, but should start to ease after that.
Related postings 相关文章:
◙ Cleanup Resumes, Facebook Sniffs Out China Investors 在美上市的中国企业将继续面临“大清洗”
News Digest: February 9, 2012 报摘： 2012年2月9日
The following press releases and media reports about Chinese companies were carried on February 9. To view a full article or story, click on the link next to the headline.
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◙ Lenovo (HKEx: 992) Announces Results for Fiscal 3rd Quarter (HKEx filing)
◙ SMIC (HKEx: 981) Reports Results For 3 Months Ended Dec 31 (HKEx filing)
◙ Qihoo 360‘s (NYSE: QIHU) Mobile Apps Back on Apple’s iTunes App Store (PRNewswire)
◙ NYSE Euronext (NYSE: NYX) Signs 1st Contract to Manage 3 China Securities Indices (Businesswire)
◙ Xioami Aims to Become Smartphone Maker With Scale of 10 Mln Unit Sales (Chinese article)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
News Digest: February 8, 2012 报摘： 2012年2月8日
The following press releases and media reports about Chinese companies were carried on February 8. To view a full article or story, click on the link next to the headline.
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◙ Apple (Nasdaq: AAPL) Removes Qihoo 360 (Nasdaq: QIHU) Apps From App Store (Chinese article)
◙ CIC, Sinopec (HKEx: 386) Among Investors in Oil Sands IPO: Source (English article)
◙ Yahoo (Nasdaq: YHOO) Chairman Exits, Review Drags On (English article)
◙ Sinopec (HKEx: 386), PetroChina (HKEx: 857) See First Fuel Price Increase in 10 Months (English article)
◙ Beijing Real Name Registration System to Be Fully Implemented by March 16 (Chinese article)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
Citron Keeps Up Qihoo Assault 香橼继续攻击奇虎
The year of the Dragon is off to a noisy start for controversial Internet security software firm Qihoo 360 (NYSE: QIHU), which is coming under yet another assault from a small western research house named Citron over the credibility of some of its user figures. Chinese media are reporting that Citron founder Andrew Left has taken his attack to China, where he did an interview with Shanghai’s influential China Business News telling the paper he will continue his campaign to debunk user numbers from Qihoo that he says are vastly inflated. (Chinese article) Citron began its assault back in November last year (previous post), saying at the time that Qihoo’s stock was probably worth about $5 per share rather than the $20 where it was trading. At the time Qihoo put out a strongly worded statement denying the allegations. But now the company’s controversial and usually combative founder Zhou Hongwei is keeping uncharacteristically quiet, saying he won’t engage in war of words over the issue which has clearly become quite sensitive. Qihoo’s shares initially fell to as low as $14 after Citron’s report first came out, but have bounced back since then and now trade at around $18. I’ll be quite frank and say I’m 1,000 percent confident that Citron has probably taken a big short position in Qihoo, and is starting to worry that it could lose big money on its bet, hence its reluctance to end its assault. At the same time, Zhou, who often uses ethically questionable business tactics, is actually taking a smart approach this time by staying quiet and letting his company’s performance speak for itself. All that said, I don’t think this story is over just yet, as I really do believe that Qihoo overstates its user numbers, though the magnitude of those overstatements is still unclear. By the time this story plays out, I’d look for Qihoo shares to trade a bit lower than where they are now, perhaps as low as $10, though I doubt they will hit the $5 mark unless a major scandal emerges. On a broader basis, what this prolonged war shows is that this kind of attack on US-listed Chinese companies, which became a common theme last year, will continue into the first half of 2012, as short sellers take advantage of the deep suspicions that still remain over Chinese accounting practices.
Bottom line: The protracted battle by a short seller against Qihoo 360 shows that such attacks will continue into 2012 and last at least through the first half of the year.
Related postings 相关文章:
◙ Report Takes Wind Out of Inflated Qihoo 奇虎遭遇Citron釜底抽薪
◙ 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
◙ Xunlei, Muddy Waters Sound Upbeat Notes 迅雷和Muddy Waters保持谨慎乐观
News Digest: February 1, 2012 报摘： 2012年2月1日
The following press releases and media reports about Chinese companies were carried on February 1. To view a full article or story, click on the link next to the headline.
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◙ Citron Continues Qihoo 360 (NYSE: QIHU) Attack, Qihoo Says Won’t Engage Verbal War (Chinese article)
◙ New Internet Map Rules to Take Effect, Google (Nasdaq: GOOG) Still Awaiting Approval (Chinese article)
◙ Lawmakers Press Obama on China Auto Parts (English article)
◙ China Telecom (HKEx: 728) Reportedly to Establish Cloud Computing Subsidiary (English article)
◙ 55tuan Says IPO Moving Ahead on Schedule, No Plans to Change Underwriter (Chinese article)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
