Seek put out a rebuttal this morning:
If it’s such bull then why respond? Blue Orca has sniffed the blood in the water and wasted no time responding:
Seek Ltd (ASX: SEK) is a growth stock without the growth. In our investment opinion (the “Report”) published on October 29, 2020, we detailed our extensive investigation indicating that Seek’s most important business, Chinese online recruiting platform Zhaopin, is inundated with zombie resumes and fake job postings.
On November 2, 2020, Seek issued a flimsy, 2-page response (the “Response”) to our Report in which it failed to meaningfully address any of the substantive evidence of fake posts and zombie resumes raised in our Report. Seek even admitted in its Response that it did “not wish to engage in detail” with our allegation. Why not? Because we are right.
Seek’s actions speak louder than its words. Since our report, Zhaopin has removed 64 of the 66 employers on its platforms we identified as likely fake, which we believe is clear validation of our work. Recall that in the markets we sampled, these employers accounted for almost 20% of the posts on these platforms, making it a significant admission of rot on Zhaopin.
In our opinion, Seek refuses to engage with our Report because our evidence is compelling. But investors deserve a straight answer, not a Company which is trying to sweep under the rug a discussion which would obviously undermine the market’s confidence in its critical Chinese platform.
Seek’s only response of substance is that Zhaopin is a “strong business with a long history” because it “continues to generate strong operating cash flows.” Seek argues that investors should have faith in Zhaopin, despite all of our evidence of zombie resumes and fake posts, because it generates cash. But if that is the case, then how does Seek explain the absence of cash flows from the Zhaopin business?
Where is Zhaopin’s Cash?
If Zhaopin has really generated so much free cash flow, why does Zhaopin’s indebtedness keep increasing?If Zhaopin’s business generated so much cash and profits, why would it need to borrow to fund this dividend? Moreover, if Zhaopin has really generated so much free cash flow, why doesn’t it pay dividends upstream to help Seek service or pay down its near toxic levels of debt?
Now SEEK will have to respond again. It should never have engaged:
You can read Blue Orca’s report here.
