Rebuttal, But Not Detailed Proof, Can XTEP Successfully Resolve The Short Selling Crisis?

XTEP was the only stock company that had been short selling for three consecutive days.

Recently, the capital market at home and abroad can be described as a good play. The short selling agencies frequently attack and stir up the nerves of the market and investors, and those unlucky "guns" enterprises are just like the target of being stabbed in the hearts of red hearts.

In May 24th this year, the short selling Blue Orca reported a short sale of Samsonite (01910-HK). On Tuesday, the short selling agency GMT issued a report before the opening of the world cup, which collectively shorted Chinese sportswear brand Anta (02020-HK), XTEP (01368-HK), 31st degree (01361-HK) and China trend (03818-HK). In June 13th, the first leading educational enterprise in the us to list in the US was good. In the future, it became the latest attack target of muddy water (Muddy Waters Research) of the famous US short selling agency. The tight timeline seemed to be a eight point serial without advertising.

However, although this short selling season has made the market atmosphere somewhat tense and lively, today we still focus on the Chinese sportswear brands that have been collectively short selling. After all, the world cup has just started. This sports stock which originally hoped to show the "home game" trend has become strange in the capital market. In short, it is all kinds of contrast and desolation.

The short selling organization was in trouble, and many sports brands such as XTEP were shot.

In June 12th, the short selling agency GMT released short selling reports that 9 of the 16 Chinese sporting goods manufacturers listed in 2005 were involved in fraud, and all of them came from Fujian.

The report also points out that apart from the companies involved in fraud, the remaining 7 well-known brands including Anta, XTEP and 31st degree are also involved in sharing fraudulent information. GMT's main accusation against these companies is that they are counterfeiting profits.

(source: GMT short selling report)

After the outbreak, the 7 well-known sports brands named after the event were still relatively calm. As shown in the following table, XTEP and Yuyuan (00551-HK) share prices fell on the next day (June 13th), and the remaining 5 companies' share prices did not fall, but China's trend (03818-HK) also rose 4%.

But Thursday's market conditions have changed. In the 7 companies, except for 03813-HK, which continued to rise, and Yuyuan rebounded slightly, the remaining 5 share prices were significantly lower than the previous day.

Today's market performance is equally divided. In addition to the rebound in China's trend and the continued growth of Yuyuan and the success of Baosheng's success in keeping the stock price up, XTEP, Anta and 361 and Lining (02331-HK), which have been named the key players, have continued to fall, especially XTEP has become the only company that has dropped three days later.

Four companies have issued clarification notices, refuting the GMT short selling charges.

In the face of GMT's short selling and accusation, Anta made the first clarification and clarification at 22:59 on the evening of 14. The board of directors took note of the publication of GMT.

The report contains a number of conjectures about the group's financial performance. The board strongly denied the guesses in the report and considered the conjectures to be inaccurate and misleading.

Anta said that in addition to the board's confirmation, it was not aware of any other information that must be announced to avoid false market conditions in the company's securities, or any insider information to be disclosed under section XIVA of the securities and Futures Ordinance (571st chapter of the Hongkong law).

Meanwhile, it is disclosed that the company is seeking legal advice on this matter and reserves the right to take legal action.

Anta believes that the GMT report contains a number of factual errors, misleading statements and unfounded speculation, and may lead to unusual price fluctuations. Therefore, it is prudent to invite shareholders and potential investors to buy and sell corporate securities.

On the morning of 15, 06:03, China's trend was also clarified by the announcement that the board was informed that the report issued on GMT12 contained some unfounded allegations about the group and its financial performance, especially its inventory management and cash flow.

China's motion explicitly denies and refutes all such allegations contained in the report, and considers it to be untrue, unreasonable and malicious. It also indicates that the company is seeking legal advice on related matters and reserves the right to take legal action and / or other compensation to the relevant bodies and / or related persons responsible for reporting.

Then, at 7 o'clock on the morning of 15, XTEP also issued a notice to clarify its position on the GMT short selling report and stated that all allegations of alleged corporate fraud in the report were unsubstantiated, unfounded and misleading.

The board of directors confirms that the company strictly complies with applicable laws and regulations and operates its business without violating accounting fraud.

XTEP also reiterated that it has been committed to timely disclosing its business and financial performance to investors, and that the company reserves the right to take legal action to seek damages or other compensation to GMT and / or related parties.

The Board considers that the report contains a number of factual errors, misleading statements and unfounded speculation, and may lead to unusual price fluctuations. It also calls for caution when the company shareholders and potential investors are buying and selling corporate securities.

On the 15 day, 08:18 360 degree also issued a clarification notice that, taking into account the actual situation of the group, all adverse allegations against the group and inference and conclusions contained in the GMT report are incorrect and misleading.

The company reserves the right to take all appropriate actions to protect its legitimate rights and interests, including, but not limited to, any action against any allegations against the group.

It also reaffirmed the company's commitment to effective communication with its shareholders and adherence to the best disclosure standards and timely and pparent disclosure to its shareholders and investors.

How can XTEP resolve the short selling crisis?

For GMT, Anta, XTEP, 31st degree and China's Refutation statement, there is no further attack on the 4 companies.

Although the opening battle of the short selling drama seems to be quite large, the subsequent spray seems to be less turbulent than the previous case. The only thing that is not very good on the "brand face" is Anta, the only stock that has been sold short for three days in addition to attracting the biggest firepower of GMT.

XTEP, which listed on the main board of the Hong Kong Stock Exchange in 2008, has developed into a well-known domestic sports brand since its establishment in 2002. Once, the slogan "XTEP, not ordinary sense" has almost reached the household name.

However, since 2012, XTEP has seen a downward trend in profitability. By 2014, business efficiency has dropped to a low level after the listing. In 2015, XTEP began to seek pformation, determined to pform from sporting goods brand to sports fashion brand, and implemented "3+", that is, "product +", "sports +" and "Internet +" strategic reform.

By 2017, XTEP completed the strategic pformation of the group in the past three years, and made some major changes to the terminal retail system. But looking back on the development experience in recent years, XTEP's every step is also full of "non ordinary feeling" - it's not easy.

Judging from recent achievements, although the group's performance has recovered somewhat after 2015, the overall fluctuation has not been stable.

As can be seen from the above table, the profitability of XTEP in the pition period is relatively volatile. Although the double growth of revenue and net profit was restored in 2015, the growth of revenue in 2016 slowed sharply, and the profit fell again. The first quarter results showed that the situation of XTEP's double declining revenue and net profit last year, the only relatively stable is that the gross profit margin of the group has maintained a weak growth in recent years.

Even if this does not teach people to completely abandon their performance, it is also suspected of manipulating profits in the GMT report.

XTEP, after roughly completing its three year pformation strategy, began to seek to expand its brand portfolio for high-end.

And other unique sports retail channels, now that XTEP, who has fully grasped the entire retail business, seems confident of future development.

But in the face of GMT's sudden short charge, XTEP and its "brothers and sisters" did not give more detailed and strong proof in refutation. In the case of the stock price falling for 3 days after the short selling incident, can XTEP successfully resolve the crisis?