Street Watchdog Starts 21Vianet Group (NASDAQ: VNET) at Sell Amid Findings of Fraud, PT $13

Findings Reported to The SEC
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November 25, 2015
 
As part of our normal course of business, we typically analyze companies that have either risen sharply or fallen off dramatically within the last few weeks.  21Vianet (NASDAQ: VNET) has been on a run for the past 2 months, and we were curious if the run would continue, or if the company was due for a major pullback.
 
As part of this analysis, we completed a review of 21Vianet’s financial statements for FY 2011 to the present as well as the company’s SEC filings for that same period of time.  To say we were rather amazed by our findings would be an understatement!  A pattern of overinflating top line revenues and/or understating bottom line losses over multiple quarters for several years emerged. 
 
What’s even more incredulous, the company’s numbers that were reported in the local currency did not exhibit this pattern.  Once we determined that the irregularities were NOT due to foreign currency gains or losses, we came to the conclusion that this is a very deliberate attempt to manipulate the US market to either show top line growth or hit EPS estimates.  During our research, we also realized that we were not the first company to accuse VNET of “committing accounting and securities fraud.”  As such, as of yesterday, November 24th, we have shared our findings with the U.S. Securities and Exchange Commission. 

When we first noticed this disturbing pattern emerge, a team member commented something to the effect, “I guess they think we’re not smart enough figure this stuff out.”  That’s the cleaned up version of what was actually said.  While we typically try to stick to the facts and keep the personal feelings out of our commentaries, we felt this statement bore repeating because, in addition to probably being true, it provided much comedic relief to an otherwise very tedious volume of research and crunching the numbers.
 
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Disclosure:  We are short VNET.  We do not have a financial relationship with the company.