Chinese online video provider Leshi Internet Information and Technology Corp, commonly known as Letv, has been targeted for not disclosing important financial information such as losses and profits, even though it is not against China's securities regulations, analysts said.
After posting an article on June 23 raising doubts about Letv's profitability, Liu Shuwei, a professor specializing on Chinese enterprises at the Central University of Finance and Economics (CUFE), published another article via her Weibo account late Sunday night claiming that Letv did not provide a breakdown of losses and profits by sector for its diversified businesses. The information is crucial for investors, Liu said in the article.
Non-disclosure of earnings does not necessarily mean the company committed any fraud, Wang Yaqian, an analyst from market research consultancy iResearch, told the Global Times Monday.
"Letv did not release complete financial data as the company might have taken into account rising competition in a fast-growing digital age," Wang said, noting that the undisclosed information is also not required to be disclosed by the China Securities Regulatory Commission.
Though the Beijing-based online video provider recorded an increase of 189 percent in its total revenue for 2014 compared to 2013, the company's profits plunged about 71 percent on a year-on-year basis, according to Letv's annual report for 2014 published in March. In terms of its core business sectors, the company recorded 87 percent increase in its advertising revenue and 443 percent increase in its terminal business, the report showed.
Still, the company should have shown profit margins in those sectors, according to Liu's article.
Liu's way of analyzing an Internet company is too academic, as Letv is different from traditional enterprises, Wang noted.
Shares of Letv slightly gained Monday despite a plunge in the broader market. The Shenzhen-listed company saw an increase of 0.6 percent in its share price, which closed at 47.05 yuan ($7.58) Monday.
Yan Han, an analyst from Beijing-based Guotai Jun'an Securities, echoed Wang's view. However, he noted that Letv has to increase its transparency in terms of disclosing its financial results. "Investors could better evaluate the company's development prospect based on sufficient data," Yan told the Global Times Monday.
Letv did not respond to a request for comments sent by the Global Times by press time.
Despite Liu's comments, investors have reason to be bullish about the company because of Letv's expansion into the smartphone business and investment in equipment provider Coolpad Group, an independent analyst focusing on Letv strategy told the Global Times Monday on condition of anonymity.
