Kai-Fu Lee speaks recently at the World Economic Forum conference in Tianjin. (Photo/Xinhua)
A showdown between Citron Research founder and short seller Andrew Left and a group of Chinese entrepreneurs led by former Google China chief Kai-Fu Lee, has intensified with both sides bringing their lawyers into the dispute.
After the two sides leveled a series of accusations against each other, Left recently went a step further by having his lawyer send a letter to the Chinese executives, demanding an apology and calling on them to retract their accusations or face a lawsuit, the Chinese-language China Economic Net reports.
Lee, chairman and CEO of tech venture capital firm Innovation Works, and a group of over 60 executives and investors recently signed a joint statement which accused short sellers led by Citron Research of targeting legitimate companies with damaging reports, when the companies had only minor problems or none at all. The statement also accused Citron Research of manipulating information to write reports that "boldly tell lies, knowing well that their American readers have no way of verifying these reports aimed at tarnishing the reputation of Chinese enterprises."
Citron has made accusations against 21 Chinese companies since 2006, causing the shares of some of these companies to drop by more than 80%, earning Citron the epithet of "the China concept stocks killer."
The latest spat was sparked by a Citron report about Chinese internet company Qihoo 360 Technology, which is listed on the New York Stock Exchange.
In one report dated Aug. 24, Citron recommended Chinese internet company Sohu, which operates the Sogou search engine, as a better investment than Qihoo 360 and called it the real rival to Baidu, the dominant player in the Chinese internet search market.
Qihoo 360 makes antivirus software but also has an online gaming platform, a web browser and a new internet search engine venture. Qihoo CEO Zhou Hongyi was among those who signed the statement.
Before this, another Citron Research report accused US personal care products marketer Nu Skin of violating direct-selling rules in Beijing, Shanghai and Hefei, leading to a 13% drop in Nu Skin's shares during a single trading session. Nu Skin said later that it would file a lawsuit against Citron Research. However, the company has neither joined the Chinese entrepreneurs' joint action against Citron Research, nor filed a lawsuit against the short seller.
In their statement, Lee and the other entrepreneurs accused Left of fraud, deceitful conduct and other illegal activities over the past few years. "Citron's reports exploited the information asymmetry between the United States and China to shamelessly lie for its own gain. This could endanger investors and cause fluctuations in stock prices," Lee said on his microblog.
In response to Lee's fourth statement accusing Citron of fraud, Citron issued three responses and sent a legal notice to the 60 Chinese entrepreneurs led by Lee, seeking an apology.