The lawsuit against Qihoo 360 in the Cayman Islands has been making headlines in recent weeks. As the next trial date approaches (court documents reveal that the next hearing will take place in early 2020), more and more journalists are writing about this case.
We’ve been covering the Maso Capital vs. Qihoo 360 case extensively in this blog. Legal experts believe the Chinese Loophole is the most important current issue in China-US relations after the trade war. While president Trump has been known to attract much media attention, more and more publications are picking up on this important issue – companies like Qihoo 360 are listing in the US, forcing minority investors to go private at a lowball valuation and relisting in China, where they both make huge profits and feel more at home.
Zhou Hongyi has made $12billion for himself with this scheme in 2018. But the Maso Capital case in the Cayman Islands could set a precedent for the industry. It’s unsurprising, then, that all eyes are on Hongyi and Qihoo to see how this one ends.
In late August, Zerohedge was the first to write about the case;
“Qihoo 360 has been embroiled in a lengthy court case in the Cayman Islands, and though it has not faced a monetary judgment yet, it has been painted in a negative light over issues such as discovery noncompliance and a lack of transparency. Moreover, the longer Qihoo journeys down this path, the likelier it is that it may be forced to reveal proprietary secrets or encounter some issues it would rather keep private made public.”
Then Lin Nguyen wrote about the story for Asia Times and South China Morning Post (SCMP) a few days later;
“Chinese companies seeking US listings, akin to Qihoo 360, are commonly incorporated in the Cayman Islands because of its flexible laws that allow controlling shareholders and founders to vote on and pass delisting proposals – a controversial policy at best. After delisting in 2016, Qihoo 360 returned to public markets two years later, listing in Shanghai at a valuation of $62 billion. However, considering the absence of real value added in the time between events, the drastic revaluation is suspect at best.”
In all cases, journalists quoted experts cautioning for mediation.
In early September, Seekingalpha was the latest to write about the trial, this time with parts of the public Cayman Islands court documents. The article focused on some outrageous evidence and testimonies that came out of the case, such as that Qihoo employees were ordered to delete company documents on WeChat to fight the discovery process and that Hongyi has not owned an electronic device since 2006. As the images we’ve attached here show, this is a false claim.
“The company’s inconsistent responses to requests, namely in terms of providing budgeting documentation, highlights either a worrying negligence or a willful effort to conceal material information from the discovery process.”
“For a company that is considered one of the largest cybersecurity providers in the world, it stands to reason that company leadership, especially its leader, would not only be familiar with technology, but also a regular user. Qihoo 360’s contention that its CEO has never had a company issued computer or mobile device and has not used a computer since setting up the company in 2006 due to “eye issues,” was categorically disproven in his own autobiography and photographic evidence of a monitor and keyboard in office.”
It's great to see media coverage for this case. How both parties will respond to this new wave of reporting is yet to be seen. Coming up to the 2020 trial dates, pressure amounts on the litigants to mediate rather than be dragged through the litigation process.