Qihoo 360’s move from the New York Stock Exchange into the Shanghai Stock Exchange in February 2018 was made possible following its merger with New Summit Limited. It also saw the company’s assets skyrocket, strengthening its position as one of the heavyweight members of the Chinese high-tech industry.
With that in mind, Qihoo’s merger has not been exempt from noise and controversy; the deal with New Summit Limited required the liquidation of the assets of several investors, which led to a gigantic legal dispute. The case, which is currently being reviewed in the Cayman Islands’ Grand Court, started in August 2016 and has neither led to a resolution nor a conciliation between the parts as of the writing of these lines. The process started after the company offered the group of investors to buy out their participation in the company at a rate of US 51.33 per share on July 22, which was refused by the counterpart (from now on addressed as the “Dissenters”).
Following the Dissenters’ refusal, Qihoo, according to the financial laws of the Cayman Islands, asked the court to determine the fair price of the shares. As a result, the court ordered Qihoo (from now on addressed as “The Company”) to open a data room accessible to all parties’ consultants and experts in order to determine the fair value of the shares. Nonetheless, in July 2017, the Dissenters filed a petition for “Summon” and the appointment of a joint forensic expert. This petition to compel The Company to share specific documents and financial information was granted by the judge, who framed Qihoo’s approach to the discovery process as somewhat ‘careless and cavalier’, granting the summon and appointing an independent forensic expert. The Company appealed the ruling in October 2017, but their petition was overruled, and they were ordered to pay 80% of the costs of the summon by the judge.
One of the most tense stages in the process came in December 2018, when the court addressed a petition by the Dissenters, who asked for the termination of the forensic audit and that The Company would not be able to rely on any factual evidence at the trial of these proceedings, in light of several malpractices. These included the alleged destruction of data, perjure regarding the health of Zhou among other accusations. Despite the harsh character of the accusations, the court dismissed the petition, stating that the Company has cooperated with the audit and that there is no evidence that the destruction of material was relevant to the case.
Judging from the first steps taken in the case, it seemed as though the balance was turning towards the Dissenters side. The acceptance of the “Summons” petition, which is considered an invasive move by a judge, and the latter’s critical arguments against the company in the ruling, attest to that. Still, the court’s rejection of the Dissenters petition in December 2018 and the judge’s compelling argument stating that The Company is indeed cooperating with the audit, points to a balance in the scale. Indeed, at this point, it is impossible to forecast whether the case will favor Qihoo or the Dissenters. However, it is clear that the longer the case takes, the more investors would feel uncertain and uncomfortable about Qihoo’s future.