Fine line between marketing and defying rules

Editorial | Mary Ma 30 Mar 2021

Investors love to hear stories, and not that long ago Evergrande founder Xu Jiayin presented a particularly electrifying story on plugin vehicles that saw the company's share price soaring soon after.

However, if one doesn't have such a gripping story to tell, perhaps the next best thing is to get people to imagine what may lie down the road, and that's what Xiaomi's Lei Jun had tried to do.

The mainland smartphone maker posted a message on its official Weibo account around a week ago to whip up enthusiasm for an upcoming "major event" that offered no substantive clues.

That left the market with no recourse but to speculate, which it proceeded to do with a certain abandon.

Could Lei be following Apple's footprints and potentially spread its consumer product line from smartphones to electric vehicles so that it can compete in the mainland with Elon Musk's Tesla or Xu's Hang Chi electric car that has all but still remained a concept to this day?

Some tech wizards were closer to the mark as the guessing game ran its speculative course. As it turned out last night, it was but the launch of some new smartphones.

The market made too much, or, to be more exact, was led to make too much of that announcement. It had little to do with Xiaomi's reported cooperation with mainland automaker Great Wall Motor that Reuters had claimed only a few days ago.

Though both companies have denied they were in talks to cooperate on electric vehicles, speculation persisted.

The so-called big event turned out to be a disappointment.

First, it came up short in failing to announce that EV venture that everyone had so recently been led to believe was coming.

Second, it offered up new products that were really par for the tech course that a firm like Xiaomi was expected to take.

Third, while chip development has never been a problem for China, the production of chips is what should matter to Xiaomi.

Yet, should everyone else be blamed for having made too much of what's coming from Xiaomi?

Had Xiaomi's Weibo message been more elaborate, the misunderstanding would have never happened.

The problem was that the message was meant to be vague from the very beginning, which is a truly serious concern.

Had the financial markets been still subject to the same level of stringency as in the past, would this have been allowed?

When full disclosure has always been the golden rule, it's all the more important to make sure it is being enforced.

The "big event" notice may not be an official statement publishable on the stock exchange, but it was still published on the official Weibo account of the company and had the weight of hundreds of millions of dollars in the market.

The regulators appear to have been slack over tricks such as these, and that's especially galling as these tricks played to the disadvantage of retail investors.

When property tycoon Xu led a marketing campaign to sell the electric car story with an animation of his futuristic Hang Chi cars, his company's share prices soared in little to no time.

Yesterday, the share price of the automobile arm of Xu crashed after Xinhua News Agency named and shamed it for pocketing a fortune without selling even a car.

Regulators are duty-bound to protect the interests of retail investors.



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