Shares in New York-listed Chinese discount retail chain Miniso tumbled by as much as 12.3 per cent in Hong Kong on Wednesday after it was accused by a US short seller of hiding the alleged deterioration of its business.
Blue Orca Capital, the Texas-based short seller run by Soren Aandahl, released a report alleging that the retailer had siphoned hundreds of millions of renminbi to its chair through a buyout of a joint venture.
Miniso, backed by Chinese internet group Tencent, raised $608mn when it listed on the New York Stock Exchange in 2020 and HK$567mn (US$72mn) this month when it held a secondary flotation in Hong Kong.
Chinese public companies in the US have come under heightened scrutiny after beverage chain Luckin Coffee was revealed in 2020 to have defrauded investors by faking more than $300mn in sales.
More than 200 Chinese companies face delisting in the US in 2024 if they do not comply with new rules from Washington requiring that public companies allow regulators to inspect their audit files. Beijing has been reluctant to allow Chinese companies to provide data to foreign regulators on national security grounds.
Blue Orca alleged that a claim by Miniso that it operated a network of independent retail outlets was false and that it had found 620 stores that were owned by executives or people close to the group’s chair and chief executive Ye Guofu.
The report also claimed that a transaction in which the company allegedly bought Ye’s stake for Rmb695mn ($102.8mn) in a joint venture established to build a new headquarters was a “naked transfer of shareholder money to the chairman”.
It added: “Chinese government records indicate that the chairman likely never contributed any capital to the JV.”
Miniso on Wednesday said it believed the report was “without merit” and that it had formed an independent committee to review the allegations. The company was “considering the appropriate course of action to protect the interests of all shareholders”, it added.
Blue Orca argued that Miniso’s stores were “secretly” struggling, citing interviews with former store managers who claimed that revenues and profits were falling.
The activist fund also claimed that a deleted statement on the company’s website in 2018 showed that its revenues had peaked at Rmb17bn.
“This means that Miniso’s revenues have shrunk over 40 per cent since [the] 2018 peak, despite a 50 per cent increase in store count,” the short seller wrote on Twitter.
It added that Chinese media had reported that the group had closed more than 850 stores by March 2019, before the start of the Covid-19 pandemic and six years after its establishment.
Miniso did not immediately respond to a request for further comment.
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