Two more US-listed Chinese companies come under financial scrutiny, less than a week after Luckin Coffee’s accounting fraud

TAL Education Group said an employee may have inflated sales at one of its business segments worth hundreds of millions of dollars

Video streaming site iQiyi denied accusations of inflating revenue and user numbers by two activist short sellers

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Floor traders at the New York Stock Exchange on 4 March 2020. Photo: EPA-EFE

Published: 12:24pm, 8 Apr 2020Updated: 2:44pm, 20 Oct 2020

Two more US-listed Chinese companies are under scrutiny for allegedly inflating their financial data, less than a week after Luckin Coffee admitted to a US$310 million accounting fraud, in a simmering scandal about corporate governance that may block the pipeline of companies seeking to raise funds on US markets.

TAL Education Group, a Beijing-based operator of tuition centres listed on the New York Stock Exchange, said an employee may have inflated the sales of a business segment worth hundreds of millions of dollars. Separately, Nasdaq-listed Chinese video streaming company iQiyi was accused by activist short sellers Wolfpack Research and Muddy Waters of making up its 2019 revenue by up to 44 per cent, while its user number was inflated by 60 per cent.

Shares of both companies fell in after-hours trading. TAL shares plunged by as much as 28 per cent, most recently changing hands at US$45.90. Shares of its biggest competitor New Oriental Education & Technology Group fell 6 per cent in after-hours trading in New York.

Shares of iQiyi fell 3.6 per cent to US$16.68 in after-hours trading, even after the company denied the short sellers’ accusations.

“The company believes that the report contains numerous errors, unsubstantiated statements and misleading conclusions and interpretations regarding information relating to the company,” iQiyi said in a statement.