Global technology-based retail firm Miniso announced on September 15 the results of an independent investigation into a highly critical report released in late July by Blue Orca Capital. Miniso asserted that allegations made in the report have no factual basis.
In July, Blue Orca Capital, a short-selling institution, released a report saying that after a seven-month investigation into Miniso, it believed that instead of operating a network of independent franchisees, hundreds of Miniso stores are secretly owned and operated by its executives or individuals closely tied to the firm’s chairman.
At the same time, Blue Orca Capital described Miniso as a declining brand whose revenue had slumped 40% from its pre-IPO peak. The brand has also experienced large-scale store closures and its franchise fee has dropped by 63% in the past two years.
Miniso said that shortly after the report was released, an independent committee was set up to oversee an independent investigation into allegations made in the report. The committee concluded that allegations in the short-selling report about the company’s franchise business model and the land transaction involving the company’s chairman were not substantiated.
In addition, affected by the report, Miniso was also subjected to class actions by US investors. Robbins Geller Rudman & Dowd LLP, a US law firm, pointed out on September 12 that a group of Miniso investors who suffered losses proposed to appoint the law firm as the lead plaintiff in a class action lawsuit, accusing the company of violating federal securities laws.
Overseas short sellers have frequently criticized Chinese companies listed in the US. Analysts at CITIC Securities previously said that there is no short selling for no reason, and there must be huge arbitrage space behind short selling. They stated, “Short sellers are wagering that the stock they are short selling will drop in price. If the stock does drop after selling, the short seller buys it back at a lower price and returns it to the lender. The difference between the sell price and the buy price is the short seller’s profit.”
In May 2021, Blue Orca Capital released a report on SoYoung, an medical aesthetics platform. The platform then pointed out huge mistakes in the report. Its share price fell following the negative report, then rebounded rapidly, rising by 7.25%.