Update: the parties continue to fight, a new article at TechInAsia can be found here.
I like websites that expose corporate misdeeds, but there is one group of websites that are rather suspect, for the simple reason that they make money from this. These are the websites linked to short sellers. First they analyse a potential short selling candidate (in this case often Nasdaq listed Chinese companies), if they do find wrong doings they will first take a "short" position and only then expose their findings.
Selling "short" means they sell shares that they don't have, if the share does indeed go down they then buy back the shares at a cheaper price, closing the short position and their profitable trade.
Citron Research is one of those companies, they did have some success in the past, but they might have made some mistakes in recent cases. TechInAsia, a Singapore based website reporting about regional tech stories, reports:
"One of China’s top tech luminaries, Kai-Fu Lee, has ripped into the short sellers Citron Research – branding their methodology “despicable” – after Citron released a new report about the Chinese web portal Sohu (NASDAQ:SOHU) and its Sogou search engine. Mr Lee, the former president of Google China and now the CEO of incubator Innovation Works, condemns the repeated short-selling of US-listed China stocks as “already questionable” before then pointing out the many factual errors – the “ignorance and deception;” the “holes and lies” – in the latest Citron post.
Kai-Fu Lee, in his first post on XueQiu, singles out “how these short sellers take advantage of the information asymmetry between China and the US,” making false likenesses and providing other bits of vague information that it can be tough for US investors to research and verify. His post is written in English, not Chinese, and is presumably aimed at such overseas investors."
I recommend readers to read the whole article on TechInAsia, and the original by Ka--Fu Lee which can be found here.
Unfortunately, this does not mean that Chinese companies listed on the Nasdaq suddenly do not have any (accounting or other) issues. But it does mean that not any report can be trusted at face value and readers have to do their own research.
Buyer beware, as usual.