Muddy Waters calls Chinese social media company Joyy ‘multi-billion dollar fraud’ right after Baidu deal
- Bots with links to YY’s own servers, but disguised as paying users, accounted for about half the value of all virtual gifts, according to Muddy Waters
- On Monday Baidu announced plans to buy YY for about US$3.6 billion to ‘gain platform and operating experience in large-scale video social media’
Short seller Muddy Waters Research has labelled Nasdaq-listed Chinese social media company Joyy “a multibillion-dollar fraud” just days after China’s search giant Baidu announced its intention to buy Joyy’s live-streaming business YY Live.
The US-based investment firm claims that up to 90 per cent of YY Live’s live-streaming revenue is fraudulent. “Users” who paid for virtual gifts were “almost entirely bots” from YY’s internal network or from external bot farms, as well as performers “roundtripping” their own gifts, according to a Muddy Waters report published on Wednesday.
Bots with links to YY’s own servers, but disguised as paying users, accounted for about half the value of all virtual gifts, according to Muddy Waters, which said it has been researching YY’s businesses for more than a year.
The short seller also called out YY’s online dating business and Bigo Live, claiming up to 80 per cent of their respective revenues were fake
“We conclude that YY’s component businesses are a fraction of the size it reports, and that the company’s reported user metrics, revenues, and cash balances are predominantly fraudulent,” said the report.
Nasdaq-listed shares of Joyy tumbled 26 per cent to close at US$73.7 on Wednesday after the report was released.