U.S. short-seller distances itself from Hong Kong-focused copycat

Sinosoft Technology

06/01/2017 10:11

Jan 6 (Reuters) - U.S.-based activist short-seller Glaucus 
Research on Friday distanced itself from a company it said had 
used its name and branding to conduct short-sell campaigns 
against two Hong Kong-listed companies.  
    The comments by Soren Aandahl, Glaucus' director of 
research, followed the publication of a report this week by 
little-known Zhongkui Research alleging Sinosoft Technology 
Group  1297.HK  had fabricated its financials.  
    Sinosoft denied the allegations in a Dec. 29 stock filing, 
but shares of the company, which were halted for a day when the 
report was published, fell 23.4 percent when it resumed trading. 
 urn:newsml:reuters.com:*:nL4N1EO1BL   
    Zhongkui Research, whose origin and founders are unknown, 
appeared to have used Glaucus' name for its online web searches, 
copied its website format, and borrowed from the U.S. firm's 
description, Aandahl said in an email. 
    "Investors should know that we have absolutely no ties to 
this copycat and have reached out to our lawyers to see what 
legal remedies we can pursue for this theft of intellectual 
property," he said.  
    The company's legal options currently include suing Zhongkui 
in the United States or Hong Kong, Aandahl added.  
    Glaucus has conducted shortselling campaigns against firms 
globally by making reports uncovering financial fraud, and then 
making a profit by shorting the stock. It has previously 
targeted Hong Kong-listed companies but has no formal operations 
in China, the company said.   
    Zhongkui Research did not respond to requests for comment. 
Little public information exists about the Hong Kong-focused 
short seller, such as whether it is a Chinese firm or a unit set 
up by a foreign company. 
    Hua Han Health Industry Holdings, the other firm targeted by 
Zhongkui Research, could not be reached for comment.  
    Glaucus Research's run-in with Zhongkui Research is not the 
first time a Western firm has experienced its brand being ripped 
off in China.     
    In 2015, Goldman Sachs faced trademark infringement issues 
when a Shenzhen-based leasing company used the same name, and 
many big foreign brands have faced similar issues in China in 
the past.   
    Glaucus, named for a god in Greek mythology who is the 
saviour of sailors and fishermen in distress, said it was 
surprised to learn about the similarities of Zhongkui's 
methodology and style. 
    Zhongkui is named for a figure in Chinese mythology 
associated with good deeds. On their websites, both firms 
identically say they offer "a unique combination of experience 
in capital markets, accounting, law, and investigative 
journalism".  
    Besides Zhongkui, other China-based short campaign firms 
have arisen, such as Hongqiao Exposed and Trinity Research 
Group, said analyst Claire Stovall of short-sell 
campaign-tracking firm Activist Shorts. 
    In the past, short-seller imitations have waged successful 
campaigns against the companies concerned, she added. 
 
 (By Jess Macy Yu and Michelle Price; Editing by Lisa Jucca and 
Clarence Fernandez) 
 ((JessicaMacy.Yu@thomsonreuters.com;)) 
 
Keywords: CHINA SHORTSELLER/ZHONGKUI