Chapter 652
Meeting
Chapter 652 Meeting
In the last three days of February, the controversy surrounding Baidu Tieba's excessive commercialization remained high, but after suspending commercial cooperation with disease-related Tieba forums, it did not provide the previously claimed results of its internal investigation.
On the first day of March, Baidu's stock price dipped slightly in pre-market trading in the US, falling as much as 5.6% during the day before recovering to 4.8% at the close. The closing price was $163, resulting in a market capitalization loss of $34 billion, equivalent to 224 billion Chinese yuan.
The Baixiaosheng Forum was overjoyed by this, believing that Baidu would surely learn a lesson from this drop.
However, Li Song, who was in Hong Kong, discussed this matter on a forum under an assumed name, and even added Yu's private remarks.
"Chinese concept stocks have generally been under pressure in the past two months. Baidu's decline was affected by public opinion, but this stock price performance clearly shows that the market regards it as the influence of a single public opinion, rather than the deterioration of the company's fundamentals."
"The revenue from Baidu Tieba's commercialization accounts for only 1% of the total revenue, which is far lower than the core search advertising business, which accounts for more than 90%."
"However, the fact that Baidu's commercialization is so mindless proves that it has many internal problems."
"I have another question for Baidu: are there any hidden dangers in its commercialization of search advertising? In other words, if even a forum with only 1% of revenue is doing these things, how corrupt must the more than 9% of advertising revenue be?"
Li Song's "Bai Xiaosheng" account belongs to a senior user, and even when using an alias, one can still view the posting history after anonymizing.
He adopted an air of rational analysis and research into financial statements, and someone glanced at the notes and noticed that he had been actively attacking LeEco when questioning it. They immediately thought that he might be a senior executive of some large company or a high-ranking member of an organization.
This approach of extending from one problem to a systemic issue aligns with the spirit of overcoming obstacles, thus continuing to spark discussions in this area.
However, compared to the shocking scale of money being sold on Tieba, discussions about the business are difficult to break out of their niche. Even when they appear in media reports, they are only mentioned briefly, serving as an aftershock of this public opinion event.
The decline on the first trading day after the weekend did have some effect.
Baidu CEO Li Yanhong's internal open letter appeared on various platforms that evening. He admitted to management failures and said he would review internal decision-making and approval processes. This response and commitment to reflection can be considered an effective way to de-escalate the situation.
Major media outlets immediately reposted the open letter, and Baidu's US stock price saw a slight rebound in after-hours trading.
Li Song closely monitored Baidu's situation. Observing this trend, he showed his post on the Baixiaosheng Forum to President Yu and remarked, "The activity level on Baidu Tieba is quite high, but this percentage is too small. It looks like Baidu's stock price will return to normal this month. On the other hand, Pinduoduo's financing..."
Baidu's stock price drop is not fundamentally damaging, while Pinduoduo seems to have suffered a greater loss for a smaller gain.
Yu Xing wasn't surprised and brought up another matter: "Baidu's technical talent is still quite good. There are some technical backbones from Carbon Silicon Data who came from there, and in the past two days, there has suddenly been a group of people interested. Its current commercialization is not so well recognized internally."
Li Song knew about the situation with the carbon silicon data, but what he heard next gave him a jolt.
Looking at the forum posts on the tablet screen, Yu Xing said, "What you said is the right direction. Baidu search advertising revenue is worth exploring. The excessive commercialization of Tieba is indeed a small thing that reveals a big problem. You should find someone to take a look at this aspect."
Li Song licked his lips and tentatively asked, "President Yu, what do you mean...?"
"If you want to short sell, then short sell. Don't ask me." Yu Xing said somewhat helplessly, "I mean exactly what I said."
Li Song couldn't help but ponder, or rather, many people would inevitably ponder, what the big short seller said, especially when it involved negative information about listed companies.
Yu Xing noticed Li Song's expression and shook his head: "Let's meet our guest tomorrow. He finally made up his mind to come."
Besides working on the silicon carbon group, one important thing on this trip to Hong Kong was meeting with investment bank traders involved in silver manipulation.
The trader, named Mike, works at Deutsche Bank and previously at JPMorgan Chase. Based on the information currently available, he believes that investment banks have been included in the scope of regulatory investigations, and he is worried that if the investigation comes to fruition, he will be convicted of a serious crime due to his past disagreements with his superiors.
Mike considered exposing the matter to regulatory agencies, but feared retaliation. His current demand is for Guo Shanfeng to pay for the evidence he possesses and to help mediate. As for why he's seeking Guo Shanfeng's help, firstly, it has a large reputation; secondly, it faces numerous lawsuits; and thirdly…
“Mr. Yu, I’ve studied you.” When Mike was asked this question by Yu Xing in person after rescheduling their meeting three times, he gave his answer: “Many big shots only perform under the spotlight and build their image in front of the media, but when they are still a nobody, that is often their true character.”
“I have read many of the Chinese media’s previous reports about you. The online forum you founded faced a lot of pressure from the parties involved in the exposure of negative situations, but you did not compromise. So, I finally thought it was worth a try.”
Yu Xing's expression was a bit strange. He hadn't expected this to become a reason, and it seemed to be a rather important one at that.
He thought for a while and said, "If the evidence you have is valid, I will help you find the best lawyer, or you can get help in Hong Kong or anywhere else."
Mike nodded solemnly: "In fact, Mr. Yu, high-frequency trading was in a gray area a few years ago. When I was at Morgan, I was told that it was compliant."
Since he had made up his mind to come to Hong Kong and get what he wanted from the big short seller, he had prepared some inside information and then pushed it all over to him.
The inside story is not complicated. Bear Stearns was once the largest silver market maker on the New York Mercantile Exchange. It was on the verge of bankruptcy during the 08 financial crisis. After Morgan acquired it, it inherited its dominant position in the silver market and then manipulated prices by placing a large number of fake orders to induce the market to cancel them.
The U.S. Commodity Futures Trading Commission (CFTC) had previously conducted an investigation but claimed that it could not find direct evidence of deliberate price manipulation.
All Mike can provide now are some transaction logs, chat logs, and recordings.
After a quick glance, Yu Xing exchanged a look with Li Song and asked Mike, "I personally believe in its authenticity, but it does need further verification. Also, would you mind if I offered you legal assistance now?"
Mike cautioned, “I don’t mind, I appreciate it, but Mr. Yu, this is only partial evidence, and I still hope it can get a fair price.”
Yu Xing asked directly, "How many do you want?"
Mike's Adam's apple bobbed nervously as he uttered his expected figure: "500 million euros."
Yu Xing nodded readily.
Seeing this, Mike immediately said, "Wait, Mr. Yu, I have one more condition."
Yu Xing thought it was his own straightforwardness that made him want to raise the price on the spot, and gestured with his eyes to indicate that he should continue.
Mike said earnestly, "I hope that the 500 million euros can be used to short the investment bank, and I can accept either a loss or a profit in the end."
Yu Xing: "..."
He paused for two seconds: "I have no intention of using this news to short sell."
Mike looked at the big short seller in front of him with a puzzled expression, saying nothing, yet it was as if he had said everything.
Yu Xing shook his head: "550 million euros, there's no short selling involved. You can get help with anything, whether it's legal or any subsequent developments."
Mike hesitated for a few seconds before standing up and extending his right hand, but his face showed undisguised regret.
(End of this chapter)