Win investors' trust through exchange

The following is an excerpt from an article by 21st Century Business Herald.

The confrontation between US-based short seller Citron Research and 66 Chinese entrepreneurs has caught many people’s attention. But the Chinese side’s fight back has not yet touched the specific core issue — whether the Chinese network browser company Qihoo 360 Technology Co really has the problems that Citron pointed out in its report.

The controversy may further aggravate the outside world’s misinformation about, or even misunderstanding of, Chinese companies.

Past experience suggests some Chinese companies do have problems, which ruins the reputations of China’s stocks in the market and increases the costs and risks of other Chinese companies listed abroad.

Chinese companies should do more to promote foreign investors’ understanding of them and respond in a timely and active way to short sellers’ investigations, which is the listed companies’ obligation and responsibility. It is actually a game between companies and short sellers to struggle for investors’ trust.

Only when the targeted companies fail to relieve investors’ suspects, can short sellers turn their research reports on the paper to real profits. The short sellers are no different from their targeted companies in seeking profits. Short selling is a highly risky investment model. Once their findings prove wrong or misleading, the short sellers will naturally face huge losses.

Chinese advertising company Focus Media Holding Ltd defeated Muddy Waters LLC’s attack last year through effective counterattack and transparent response. The company won investors’ trust the first time with well-targeted information, disclosure and explanation.

Chinese companies should also improve their understanding of the rules of the international market and treat short sellers calmly and effectively. Short selling is a normal practice of a mature stock market and helps keep it clean.