Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of online game maker Perfect World (Nasdaq: PWRD ) jumped 16% today after the company responded to allegations of fraud.
So what: On Monday shares took a dive after a blog on Tianya, a Chinese social-networking site, alleged an investigation was ongoing at the company. Today the company responded with a �firmly and forcefully� written nine-point press release. Maybe the most notable thing is that an independent audit committee of the company�s board has been reviewing the allegations and independent legal counsel will assist in the review.
Now what: This kind of response is exactly what you want from management when accusations are brought up, although I�m not sure the words �firmly and forcefully� will help convince anyone. Investors are still worried any time fraud is brought up in relation to Chinese small-cap companies because too often it has proved to be true. Since I don�t know which side to believe, I�ll enjoy my seat on the sidelines and let the bears and bulls battle it out in the market. If past experience is any indication, it could be a long, drawn-out battle.
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