Joyy shares jump after record plunge in wake of short-seller report

Shares in Joyy jumped by the most in three years, after a record plunge from a day earlier following the release of a short-seller report that labelled a unit of US-listed Chinese technology company “a fraud”.

The Nasdaq-listed stock rose 17 per cent on Thursday, the biggest daily increase since November 2017, after the company laid out its objections to a year-long investigation by Muddy Waters Research.

The live streaming company said in a statement it was “open to cash verification and diligence to be conducted by competent third-party advisers”. It also pointed to a $300m dividend announced in August — of which it said $25m had already been paid — as evidence of its confidence in its ability to generate cash.

YY Live, Joyy’s live streaming platform in mainland China that was the subject of the Muddy Waters report, had criticised the research as “full of ignorance” and “unclear logic” in local media.

Thursday’s share price rise recovers some of the fall of up to 26 per cent. The research was published just days after Baidu, the Chinese technology group, announced a $3.6bn deal to buy YY Live.

YY, like the short video app TikTok, features influencers who sing and interact with the platform’s users, with viewers sending virtual gifts that turn into cash for the streamers.

Muddy Waters alleged paying fans were largely bots from YY’s internal platform.

The short-seller responded to questions about its investigation by releasing a seven-page explanation of the allegations and providing instructions for how to recreate its work. “If you’re interested, hurry — just like $GSX, YY will likely try to plug these holes ASAP!” Muddy Waters said in a tweet with a link to the document. The short-seller was referring to GSX Techedu, a Chinese education company that is being probed by the US securities regulator.

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YY Live joins a number of mainland Chinese groups listed in the US to face concerns over accounting practices, fabricated sales and inflated revenues. These include Luckin Coffee, which was found to have millions of dollars of fabricated sales after an internal investigation.

A Hong Kong-based lawyer, speaking on the basis of anonymity, said they expected one repercussion would be that the Baidu deal was delayed as Joyy worked to reassure investors and disprove the allegations. “Past precedent suggests this is going to take some time,” the person said.

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