Market Overview

Vimicro International Shrugs Off Short-Seller Attack


Vimicro International Corporation (NASDAQ: VIMC) shares shrugged off a short-seller's report Monday that accused the company of fraud and its two co-founders of embezzling more than $600 million by diverting company assets.

"All that is left of VIMC is the illusion of VIMC as a going concern," according to the unsigned report by the research firm, called Trinity Research Group which hasn't disclosed its principals nor headquarters.

Short interest in Vimicro as of November 14 represented about 1.7 million of the company's 344.8 million shares outstanding.

Vimicro has a market capitalization of $139.5 million and is up more than 238 percent year-to-date, with much of the gains coming this past autumn on favorable analysts reports, government contracts and joint venture news.

In its 37-page report, Trinity said Vimicro co-founders Deng Shonghan and Jon Zhaowei embezzled the money over a four-year period. Trinity added that subsequently, the company has indulged in "accounting trickery" and that most of the company's revenue is derived from selling products to joint ventures that it controls.

"The majority of that revenue it generates by selling product to itself has not been and likely never will be collected," Trinity said.

"If you are short VIMC, congratulations. You were right," Trinity said, although Vimicro closed Monday up more than 14 percent at $6.57.

Investors' reaction to Trinity's latest effort is in sharp contrast to an earlier report issued by Trinity on 21Vianet Group Inc. in September.

That earlier report sent 21Vianet down more than 18 percent, although 21Vianet dismissed the accusations as "baseless and malicious," and its shares recovered within a week.

Short sellers have targeted a number of China-based companies recently, including NQ Mobile which was accused of unsavory business practices in late October by Muddy Waters LLC's Carson Block.

Block first launched an attack on NQ in 2013.

Posted-In: Trinity ResearchAnalyst Color News Short Sellers Rumors After-Hours Center


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