These days I noticed that a tiny US company with a fruit name “Citron”, with around 3000 followers on Twitter, has become the center of the spotlight of “a fraud of anti-fraud”; thanks to China’s tech guru Kai-Fu Lee’s indignant condemnation on it. The burning question is: will this joint protestation, from Lee and other 60 Chinese business elites, help to achieve their goal of cleansing the funky air of shorting China concept stock in US?
Let me start with the so called “villain” (at least in the eyes of most Chinese) Andrew Left in our story. According to Wikipedia, he is somewhat controversial and had a little troubling past. His first job had been a salesman for a trading firm which was later on sanctioned by National Futures Association for cheating clients. Moving on, his “short-selling” business has prospered and been hailed as a sort of “fraud oracle” by various western media. Let us say just an ordinary business man with minimum fame. But in my view, he seems pretty stupid because there has been an abundance of short sellers (either good or bad ones) around for about two years and Citron turned out to be the primal focal point today.
Then return to our “hero” Lee, a Taiwanese born American, computer scientist, former president of Google China, current founder of incubator fund “Innovation Works”, one of the most influential figures in China’s internet field, declaimed that he no longer can ignore those unjustifiable lies hurting innocent Chinese tech firms, fomented by those US short sellers, especially led by Citron.
It often tells “hero” should takedown “Villain” in the battle. So as in the debate of “Qihoo vs Sohu”, Lee’s well-structured counter-arguments to support Qihoo appear to win over Left’s coarse deprecation on it (you can read Lee’s full harangue in here).
But our “LL” story has a twist here. Left refuted that the motif behind Lee’s defending for Qihoo was simply because Qihoo is one of the investors of Lee’s “Innovation Works”, though Lee argued Qihoo is just a tiny contributor in a fund that “Innovation Works” co-operates with about 80 other partners. Suddenly our “hero” wears the suspicion of “self-interests seeker”.
Well, one ugly truth is some Chinese firms, especially certain reverse mergers, either tech or non-tech, have been practicing accounting or other types of fraud. If China business is a bowl of delicious chicken soup, then it has been floated with some dead flies. Sadly few dead flies have already stirred a wild vomit of “short China” among US investors. Left is just one of the opportunists and might take things too far.
Lee knows such vomit has to stop, for it would severely pollute the IPO prospect of China startups, some I believe are under his supervision and still aspire to go IPO in USA in future. Remember primary Chinese VC exit is via IPO, not “M&A”. In addition, how about the benefits of those Lee’s direct or indirect Chinese partners whose companies are already public listed in USA, again like Qihoo?
Can such joint statement work? My answer would be “Hardly”. Most of the Chinese business leaders in the statement (names are here), if not all of them, are not that famous in US. When you are not a key opinion leader in that social context, your words do not carry much weight. To make matter worse, now days US seemed to be injected a heavy dose of animosity feeling toward China, either politically or economically.
Finally is there a hope for China tech companies to combat short selling? My boring conclusion would be: you cannot control slanders or rumors; however what you can do is working hard while keeping your commercial integrity. A real diamond, regardless buried in rocks or covered with mud, will shine and attract admires eventually; and in this case here, your optimistic investors either before or after IPO.