ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintTitle ChevronIcon Twitter
Technology

Chinese livestreamer JOYY hit by accounting fraud allegations

Revelation comes after Baidu announced plan to buy YY Live arm

Nasdaq-listed Chinese livestreaming company JOYY denies allegations of accounting fraud at its domestic business YY Live (Screenshot from JOYY's website).

BEIJING -- Chinese livestreaming company JOYY has been hit by allegations of accounting fraud almost immediately after receiving a takeover bid from Chinese search engine Baidu for its domestic business, YY Live.

JOYY, which is listed on Nasdaq, denies the allegations. But they could still disrupt the Baidu transaction, which was scheduled to complete in the first half of next year.

The allegation was made by Muddy Waters, a U.S. investment company, which described YY Live as "almost entirely fake" and "an ecosystem of mirages" in a report published on Wednesday.

"Its supposedly high-earning performers in reality take home only a fraction of their reported totals," the report alleges. "The purportedly independent channel owners are largely controlled by YY in order to facilitate continuous sham transactions," it added. Shares of JOYY dropped by 26% on an intraday basis on Wednesday.

JOYY has countered the accusations. "The company believes that the report contains numerous errors, unsubstantiated statements, and misleading conclusions and interpretations regarding information relating to the company," it said on Thursday.

"Muddy Waters' report shows its lack of a basic understanding of the live streaming industry in China," it added.

Baidu has declined to comment. A person familiar with the internet industry in China said that the allegation, if proven accurate, could stop Baidu from proceeding with the takeover.

"Even if untrue, the allegation could delay the process so that investigation can be made into the issue," the person said.

Earlier this year, Muddy Waters uncovered a suspected accounting fraud at major Chinese coffee store chain Luckin Coffee, which the Chinese company admitted to in April. Luckin Coffee was delisted from the Nasdaq stock market in June.

In April, another online video platform, iQiyi, was accused by Wolfpack Research, another U.S. investment company, of falsifying sales.

IQiyi acknowledged in August that it was being investigated by the U.S. Securities and Exchange Commission. A company executive stressed, however, that the management had confidence in its own corporate governance system.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more