The SEEK Limited (ASX: SEK) share price is down 4% this morning after the company defended itself from shorters.
What’s happening?
Let me remind what happened last week. According to reporting by the Australian Financial Review, a short seller called Blue Orca has said that Zhaopin, SEEK’s Chinese business, is full of bogus job listings to make it appear as though there’s user growth. It also reportedly said that its valuation is “vastly inflated”.
Part of the claims is that Zhaopin isn’t the market leader in China and pays people to put their resume onto the portal. Blue Orca said that SEEK isn’t generating any growth and is relying on acquisitions for growth.
SEEK’s response
This morning SEEK said that the report contains many inaccurate statements and makes allegations of a very serious nature that are unsubstantiated.
The employment business said that it strongly disagrees with the Zhaopin allegations, saying that the Chinese business has strict processes in place to verify and onboard customers. It said: “Some negative examples can be found on any online employment marketplace but the assertions made in the report are greatly exaggerated and misleading.”
It acknowledged Zhaopin may well not be the leader in all the key metrics, but it is with many. SEEK also pointed to the fact that Zhaopin’s cashflow generation has resulted in it having around $222 million of cash, up from $44 million in June 2019.
SEEK also strongly disagreed with the accounting assertations by the shorter. It pointed out that over the last three financial years it made just over $1 billion of operating cashflow, compared to dividends paid of $397 million and capitalised product and development costs of $309 million.
Andrew Bassat, the CEO and co-founder of SEEK, said: “We accept that market participants have different opinions, however this report is littered with inaccuracies. We are well positioned for future growth and remain confident in SEEK’s long term outlook.”
Summary thoughts
I wouldn’t expect SEEK to say anything less, really. There are a lot of different things to think about with SEEK and all of the different segments may make it harder to get a full picture.
I’m not sure I’d want to buy SEEK shares today, the market certainly doesn’t want to – that’s why it’s down again. But there are other ASX growth shares I’d rather buy first like Pushpay Holdings Ltd (ASX: PPH).
