Trouble brews among “China short sellers” – Photo by Alotor
A post on Linkedin today by Beijing-based venture capitalist, Kai Fu Lee, took aim at short-seller Citron Research. Lee, in addition to several other parties, have lodged legal complaints against the Detroit firm alleging the company published false reports to manipulate the stock market; i.e. accumulating a short position, then releasing negative information.
According to Lee, the game takes advantage of Chinese/English language barriers from both ends. Stateside, Americans have no way to efficiently verify claims made in Citron reports, instead relying on trust alone. On the far side of the world, Chinese businessmen, faced with navigating a system in English, are at pains to fight back.
True or not, the potential for rigging of this type is very real, although it seems a difficult game to sustain long term. Given the challenges of Mandarin, it’s one more thing to guard against for the foreseeable future.