“lex question for soufun report released research group, points out that the soufun has seven deadly SINS. Soufun respond to the report on Friday, but respond to eschew report is the key question, has been accused of overblown. Soufun fears will continue to suffer.
soufun director mo TianQuan
short-seller enumerate the soufun and total chairman TianQuan seven points. Soufun’s official response to only a few of them, but about 2011, soufun under control of the President and his wife bought a charity, Arden House, as well as the operation of the charity is not transparent and so on key question soufun does not give any formal reply.
even soufun in response to Wall Street to buy housing vacancy on issues such as, the answer obviously pale. The personage inside course of study thinks, soufun’s reply to the lack of strength, “full of useless mandarin if soufun don’t have the strength of the rhetoric, could continue into doubt.”
below is short of lex’s research group report points:
we think the soufun, founder and chairman of the board of directors has been through a series of suspicious trading company resources for personal use, these transactions involve expensive real estate in New York and identity suspicious of charity. Because of the soufun adopts variable interest entity structure, shareholders can only be fully believe that the good faith, chairman of the board of directors of the company because he is in China to soufun operations with the ultimate ownership and control. We believe that chairman of soufun irrevocably broke the trust of shareholders. In our view, this means that the soufun stock only in the case of chairman obvious respect their fiduciary duty worthwhile. .
1, the queen of Versailles. In 2011, chairman of soufun and his wife under the control of a charity for the Arden House, this is a landmark palace in the United States. As far as we know, soufun never disclosed in the public file, did not mention in the company’s balance sheet; But there is evidence that the company resources are used to operate the building can be used to purchase, to serve the President and his wife personal interests:
a. Real estate broker’s most familiar with the matter. Arden of the real estate agent has claimed the House, the seller has to sell this property to soufun.
b. registered address. Arden House deed will soufun’s New York headquarters as all address.
c. company staff. From soufun an employee of the company email address, it seems, he like Arden House site manager. An investigator property visited this place, received by the employees, the latter to our investigators provided his soufun email address.
d. not qualified charities? Buy Arden House charity is not the domestic tax agency (IRS) accord with qualification of the acceptable tax-free donations charity list, and we did not find any evidence that the charity had ever worked in a charity event in good faith.
2, 72, Wall Street did not conduct training activities? Prices at $61 million in 2011, soufun bought another landmark in New York City, is located in the Wall Street no. 72 of American international group (AIG), the building, on the surface, claimed to have used as a training center, by the chairman of soufun under the control of another non-profit organization responsible for the operation.
a. missing charitable donations. Soufun announced that the company in 2011 to the chairman of the board of directors under the operation of a charity has paid more than $200. But the American public records clearly show the irs, the same a charity to accept donations in 2011 only for less than $50000. In our opinion, this is probably due to the chairman to misappropriate the funds, and the charity never received the money.
b. empty table empty chair. From us to the spot investigation and dialogue with Wall Street no. 72, the doorman told, buy the building in soufun 20 months later, the building is still vacant, has not been used as a training center.
c. waste or corruption? Soufun deal to buy Wall Street no. 72 from essentially looks very suspicious. Why should soufun in midtown Manhattan rental (let alone is actually buy) the world’s most expensive real estate, 7000 miles away in China for training employees? American international group in this building to train 116000 staff worldwide (an estimated half work in the United States). Why soufun need 32.5 square feet (30000 square metres) of space to train just 7743 employees (and nearly all the employees working in China)?
3, the company holiday. In March 2012, soufun for $13 million in five-star beach resort in hainan island for the 44 hotel room, on the surface is used as office and “internal training”. This is another example of use of company funds to buy the perfect vacation property, this property looks to soufun training or business operations is not necessary.
4, shun cheong group. Soufun, chairman and his wife hired longtop’s former chief financial officer as shun cheong group chairman of the audit committee, and he was a notorious liar, have led to the $1 billion in shareholder value evaporation. Shun cheong group is a Hong Kong stock exchange listed company, a controlling stake owned by soufun chairman and his wife, two people hold a 60% stake in the group.
5, accounting risk. Soufun has parted ways with the audit institutions in 2004 and 2004, the reason is that the company’s accounting problems worrying. Although auditors have been replaced, but management did not change.
6, high dividend, unsustainable. Soufun distributed in 2011 and 2011, the three special dividends, dividends totaled $273 million. In our view, the dividend policy is not sustainable, will lead to market significantly undervalued the company cost of capital.
7, vulnerable to damage variable interest entity structure. Soufun variable interest entity structure makes the chairman has the Chinese operations of ownership and control, so the shareholders must fully trust his honesty, because they held by soufun net stock value depends on a call option, the call options will be in soufun overseas shareholders and chairman of the dispute under the condition of transferring control of the operations to the former, but given the Chinese law does not allow overseas entities Has the ownership of the Chinese Internet companies, may be unable to perform the contract rights. Even in the ideal world, that is, according to Chinese law is this right can be performed, shareholders can only through a way of holding the line, that is a court of law in China and the rich and powerful, soufun operation business ownership property of Chinese citizens litigation and win, this seems highly unlikely.
here are soufun’s response:
1, we formed a group called the chairman’s family “Natural protection and Research Center” (Research Center on Natural Conservation) of the non-profit organization to buy Arden House, who is the senior management training program at Columbia University (Columbia University Executive designed) training Center. Chairman of family (not soufun) to pay the full cost of the purchase transaction. Before the deal was done, “natural protection and research center” is using the soufun’s New York office address to receive the letter (the future may still be some letters sent to the New York City office of the soufun, the reason was that the address change may take longer). Chairman of the board of directors of the company (as well as the director of the “heart” for the conservation of nature study) occasionally invite soufun staff and visiting clients free use Arden House. Arden are House website soufun contact office in New York, to answer any questions soufun visiting staff and customers.
2, soufun is to buy Wall Street no. 72, is to implement the company long-term strategic global training program, these plans always referred to as the “soufun business school”. The facilities need to repair, is not in a state of complete work. Soufun always use it as a temporary office, occasionally open to soufun staff and visiting clients (visitors to 62, 2011, 2012, 241, 2013, planning for 350 people). According to the preliminary plan, the facility will be fully opened in two years. For Training purposes and visiting soufun staff and customers have mostly by an associated party responsible for arranging, called “Wall Street Global Training Center” (Wall Street Global Training Center, it is a non-profit organization) in the application process, and chairman of soufun is director of the Center for the Training. Over the past two years, soufun for more than 300 employees visiting relevant matters to the global training center “Wall Street” paid about $2 million (with the securities and exchange commission (SEC) to disclose this information).
3, soufun in March 2012 to buy the property, sanya in hainan island have been used as a corporate training, staff reward and other commercial purposes.
4, soufun, chairman of the family have the Hong Kong stock exchange listed company shun cheong group (Hong Kong stock exchange trading code: 0650), about 60% of the shares, the company fully comply with the Hong Kong stock exchange rules of the shareholders, directors and employees.
5, soufun cooperation with the current auditors ernst & young has for more than five years. Soufun always keep transparency of the ernst & young and professional relations of cooperation. Whether before or now, all audit related information have been fully disclosed to the securities and exchange commission.
6, since two and a half years ago in New York stock exchange, soufun three times already distributing dividends. Soufun cash first will be used for expanding activity; Then, the company needs to create between $100 million to $150 million in cash reserves; After this, the company may consider to pay dividends to shareholders.
7, since it was founded in 1999, soufun always adopts variable interest entity (VIE) structure, almost 14 years have never changed.
soufun welcome all sorts of views and comments about the company’s business and corporate governance, even if some of them may not reflect the facts. We believe that these views and comments will help improve our operations in the future. We are convinced that with the management and staff with a positive attitude of unremitting efforts, soufun will become bigger, better and stronger.
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