Chinanews.com client Beijing, April 9 (Xie Yiguan) entered April, the Chinese stock market collectively "reverse". After Ruixing Coffee exposed that it had forged a 2.2 billion transaction, Good Future, iQiyi, and whoever it learns from have also "incidents". Ten years ago, the short sale of Chinese stocks is going to repeat itself?

It's not from the exposure of employee fraud

On the morning of April 8th, Beijing time, Future Education Group announced that during the routine internal audit, the company suspected that the employee in question colluded with external suppliers and forged contracts and other documents, wrongly exaggerating the "Light Class" "Sales data, in the 2020 fiscal year ending February 29, 2020, Light Class sales accounted for 3% to 4% of the company's total fiscal year 2020 revenue.

Screenshot of Good Future Announcement.

After the news was released, on the 8th, the stock price of U.S. stocks fell more than 28% in the non-trading period of the US stock market, and closed down 6.74% on the day.

Many funds and foreign investment banks have been affected. Wind data shows that a total of 10 QDII funds hold a good future, and Harvest Overseas Chinese stocks hold the most, with a total of 504,300 shares. Among the top ten shareholders, UBS, Morgan Stanley and other well-known investment banks are among them.

As for why a good future will choose self-exposure, according to Chen Zunde, general manager of Guangdong Fande Investment Co., Ltd., "In such a transparent environment, self-exposure may better protect the company's image than other organizations find."

In the critical period disclosed in the annual report, in addition to choosing self-exposure as Ruixing Coffee, it is coincident that, before the future, it was also short-sold by the internationally renowned short-selling agency.

On June 13, 2018, Muddy Water issued a short report on the good future, questioning its fraudulent financial reports since at least 2016, and creating fraudulent profits. Affected by the report, Good Day future stocks fell more than 15% in intraday trading. However, Good Future subsequently stated that the report's allegations contained a large number of errors, unconfirmed guesses and malicious interpretation of the incident.

IQiyi and who you learn from have been short

Recently, "Water Reverse" also has a large video site iQiyi and online education institutions with whom to learn.

Muddy Water said on Twitter on the 7th that it assisted Wolfpack Research to conduct research on iQiyi, and then shorted iQiyi stock. Wolfpack Research said that iQIYI had fraudulent activities before the IPO in 2018; it is estimated that iQIYI's revenue boasted about RMB 8-13 billion last year, and the number of users boasted about 42% -60%.

However, iQiyi subsequently issued a statement denying fraud, saying that Wolfpack Research ’s short report on April 7 contained a large number of errors, unconfirmed statements, and misleading conclusions and explanations related to iQiyi.

In the market, iQIYI's stock price suddenly collapsed by more than 10% on the 7th day, but it ended up more than 3%, and fell sharply by 4.57% on the 8th. Baidu, the largest shareholder of iQiyi, fell more than 1% on the 7th and fell 4.38% on the 8th. The stock of the second largest shareholder of Hong Kong stocks, Xiaomi, closed down 2.86% on the 8th.

Data map: iQiyi booth. Photo by Wu Tao

Falling into the "financial fraud" storm, there are those who are short online education institutions with whom to learn. In February, the short-selling agency Grizzly Research said in a report that the net profit of who it learns from in 2018 was overstated by 74.6%, and the number of students was increased by brushing the bill.

On April 3, with whom to learn to release the 2019 annual report, became the first Chinese stock to disclose financial reports. Under the doubt of financial fraud, the stock price plunged 15.52% on the same day.

On April 6, with whom to learn to issue an announcement to respond to investors' questions about financial audit, saying that Deloitte & Touche issued a standard, unreserved audit opinion, the relevant statement is different from other institutions based on Sarbanes- The relevant provisions of the Oxley Act.

On April 8, in the face of doubts, Chen Xiangdong, the founder and CEO, said at a media communication meeting that all business behavior and performance data with whom to learn are based on integrity and never fraud.

However, the market didn't buy it. The stock price fell 3.51% on the 7th and fell 6.1% again on the 8th.

The Chinese stocks are frequently shorted, Ruixing fakes the aftershocks?

On April 2, Ruixing Coffee disclosed that the chief operating officer and other counterfeit 2.2 billion transactions, confirmed the short selling of muddy water.

After Ruixing Coffee exposed its ugliness, many market analysts believe that this move may drag down Chinese stock companies and cause the US stock market to have a crisis of confidence in Chinese stocks.

Li Nan, a former vice president of Meizu, also said on Weibo that Ruixing is not actually using US investor money to subsidize users, but is actually using the credit of China Prospective Shares in the world ’s largest capital market to cash out. "Nasdaq's Chinese stock credit, he cut in one breath."

Data Map: A corner of Ruixing Coffee Store. Photo by Wang Shanshan

Kuang Yuqing, the founder of Lens Research, said that one of the important reasons for iQiyi and other incidents is that the Ruixing incident has paved the way. "The short-selling report may have been written long ago and is ready, just waiting for a good time to release it."

"The Ruixing incident has caused a crisis of trust among international investors in China Prospective Stock Company. Based on this crisis of trust, it is easy to increase the panic effect and increase the effect of short selling.

In Chen Zunde's view, Chinese stocks are frequently shorted. In addition to the doubts about the data of Chinese companies abroad, there are two factors. First, the market performance of the US stock market is not very good, and the market capital chain is relatively tight. Good short time. Second, the performance of Chinese stocks is stronger than that of the US stock index, and the valuation of the secondary market is relatively high. In this case, there is a certain room for decline in short selling.

Will Chinese stocks sell short?

In fact, in the US stock market, due to its characteristics, the Chinese stocks have been "snapped" by short-selling agencies such as muddy water, but the biggest short-selling wave was ten years ago.

From March to April 2010, the US Public Company Accounting Supervision Committee and the US Securities and Exchange Commission investigated the financial issues and audit institutions of listed companies through reverse takeovers, and raised several questions about Chinese concept stocks.

When Chinese stocks were at the forefront of the storm, in June 2010, Hunshui Company was established, and then released a short report on Dongfang Paper, which opened the prelude to the crazy "sniping" of the stocks.

Since then, companies such as Green Connaught Technology, China High Speed ​​Channel, and Multi-Global Water have been short-listed by muddy water and citron for suspected "fraud", leading to delisting. The data shows that the total number of Chinese companies that experienced a suspension of trading from 2010 to 2011 reached 42, of which 28 were ordered to delist and 1 was delisted due to bankruptcy.

However, there are also examples of failures in the "sniping war" of short-selling agencies against the Chinese stock market. In 2009 and 2012, New Oriental encountered the shorts of citron and muddy water twice, and was ultimately safe and sound.

Although short-selling institutions are not "one hundred shots," many people now worry that the "short selling tide" of Chinese stocks ten years ago will be staged again.

Kuang Yuqing believes that it cannot be ruled out that more Chinese stock companies will be shorted one after another. "In the short term, there will be less short-selling, because there are not many available targets." Chen Zunde said, but the future will be an intermittent event, because there will be many companies going overseas to list overseas, and there may be a few frauds. (Finish)