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False US short-seller reports harm Chinese hi-tech companies, US investors

(Xinhua)

08:24, September 06, 2012

Former head of Google China and prominent start-up investor Kai-Fu Lee said Wednesday that inaccurate investment reports on Chinese hi-tech companies filed by U.S. short-sellers would hurt both businesses in China and investors in the United States.

In an interview with Xinhua, Lee said falsified reports issued by Citron Research and other American short-sellers could block more Chinese hi-tech companies from going public on U.S. stock exchanges.

"This would also mislead and eventually harm American investors because China is such a huge growing market with good investment returns," Lee said.

Lee and several dozen other Chinese executives issued a statement Tuesday accusing American short-sellers of citing erroneous data and mischaracterizing Chinese hi-tech companies' products when writing reports on them.

Referring to Citron's report on Sogou, a search engine and Chinese character input method affiliated with web portal operator Sohu, Lee said one obvious error, among others, is that it stated the Sogou search engine has a 10-percent market share in China, while, in fact, it has a 4-percent market share.

Later Tuesday, Andrew Left, founder of Citron questioned Lee's motivations, saying Sohu was once a major rival of Lee's. Left also said Qihoo 360 Technology Co., a target of several negative Citron reports, and Qihoo-backer Sequoia Capital are both investors in Innovation Works, Lee's technology start-up incubator.

In response, Less said he is on good terms with Sohu bosses and that even Wang Xiaochuan, Chief Technology Officer of Sohu and CEO of Sogou, signed the statement. He also said Qihoo 360 only plays a minor role in Innovation Works' finance pool.

Admitting short-sellers' earlier successes in taking down U.S.-listed Chinese companies through fraudulent acts, Lee said they have gone too far in the past couple of years by going after companies with few problems or no problems at all.

According to Lee, hi-tech companies face difficulties in going public in China due to long waiting lines and a general lack of understanding about their businesses.

"With higher recognition of hi-tech stocks, the U.S. is the best place for hi-tech companies to be listed and I don't want to see that chance being denied," he said.

Lee's Innovation Works has invested in 50 companies, most of which plan for a U.S. initial public offering (IPO).

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