Angel investor gives wings to new firms

Promising sectors

According to Lee, over the next five years, mobile Internet companies will come to prominence. "Today, you think of Baidu, Alibaba and Tencent as three giants. I predict that in five years there will be two or three other mobile Internet companies at the same level of power and value as these companies," said Lee.

He specifically cited entertainment such as music, video, gaming, social networking and e-reading as aspects of the market young people are mostly interested in and that are most promising.

The value of the Chinese mobile Internet market totaled 14.8 billion yuan ($2.38 billion) in the third quarter of 2012, up 102.1 percent year-on-year, data from iResearch Consulting Group shows.

Lee also said he is personally keeping a close eye on digital television, enterprises selling software to corporate clients and big data businesses.

Against short sellers

Chinese software company Qihoo 360 Technology Co Ltd in August initiated legal action against Citron Research and its main contributor Andrew Left for the short seller's "untruthful publications or statements regarding Qihoo 360", the New York-listed company said in a statement.

Citron is blamed for affecting the share prices of 21 New York-listed Chinese companies since 2006, with 16 companies seeing their prices drop more than 80 percent, and seven being forced to delist. Qihoo was among those that suffered a fall in the value of their shares. Lee said he has also filed a lawsuit against Citron for alleged defamation, which will be held in Beijing.

The spat came after Lee rounded up more than 60 top Chinese technology executives to defend US-listed Chinese companies from being hit by short sellers in a joint letter in September.

In one of the alleged mistakes in the piece of analysis that Lee pointed out, a Chinese search engine is described as using a new search method that is simply illogical and that does not exist.

Lee said the "intentional" behavior of Citron has had several dangerous outcomes, including misleading US investors, damaging their confidence in Chinese companies and causing Chinese companies' stock prices to fall when they are "completely innocent".

Furthermore, the Chinese companies that were listed in the US market may choose to turn private and relist in Hong Kong or elsewhere while those waiting to list may defer that move.

"So all these could end up with the result that US stock exchanges, which could be perfect stock exchanges, may no longer have Chinese stocks," Lee said, adding that he wanted to help US investors understand Citron and Muddy Waters, another short seller of stocks in Chinese companies, "are not to be trusted", that warning signals need to be sent to short sellers so they can "no longer fool people".

Lee said his action also gives the signal to Chinese companies that if a company is unfairly treated it should react immediately, especially by using the legal system to protect itself. Spending money for this purpose is worthwhile.

The most crucial thing is to have truthful and authentic financial data, said Lee. Chinese companies should have strong public relations with the media and attach importance to investor relations.

Citron has admitted some mistakes. "It's just a step and they might be more careful in the future because they know they are being watched by Chinese companies," said Lee. "Hopefully it could help Chinese companies regain the confidence to defend themselves."

 

caixiao@chinadaily.com.cn

Q+A: Kai-Fu Lee