Internet Post Accuses Perfect World CEO Of Dirty Dealings

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  • on January 10th, 2012

Shares of Chinese online game firm Perfect World ($PWRD) plunged 26% Monday because of a Chinese Internet posting accusing CEO Michael Chi of insider dealings, tax evasion and other misdeeds. The CEO denied the charges to at least one sell side analyst but so far the company has not issued an official press release.

I have no idea if the charges are true, but the last thing Chinese Internet stocks need is the exposure of bad behavior at one of the top online game firms. If the accusations turn out to be even partially true then expect other Chinese net stocks to fall further.

When it comes to Chinese companies and accusations of wrongdoing in this market environment, investors may be right to shoot first.

[UPDATE: Perfect World has issued a press release denouncing the accusations as "inaccurate, defamatory and malicious", claiming they followed "several extortion activities attempting to extort money from the Company and Mr. Chi, and malicious and false allegations reported to certain local government authorities in China." In addition "independent audit committee of the Company's Board of Directors has been working to thoroughly review these allegations and will engage an independent legal counsel to assist with its review."  END UPDATE]

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