(Yicai Global) July 27 -- Miniso Group’s shares dived in Hong Kong despite the Chinese discount retail chain rebutting allegations made in a short-seller report by Blue Orca Capital, including that the company “lies about its core business model.”

Miniso’s Hong Kong-listed stock [HKG: 9896] closed 11 percent lower today at HKD12.46 (USD1.59), after slumping as much as 12.3 percent earlier. In New York, the company’s shares [NYSE: MNSO] were 2 percent higher in pre-market trading at USD6.25 apiece as of 8.17 a.m. local time.

Blue Orca's report is groundless, Guangzhou-based Miniso said in a filing with the Hong Kong Stock Exchange today, adding that the US-based activist investment firm has misinterpreted its corporate information and reached misleading conclusions. To protect the rights and interest of shareholders, Miniso’s board has decided to set up an independent committee to look into the accusations, it said.

In the research report released yesterday after a seven-month investigation, Blue Orca said Miniso claims to operate an asset-light, high-margin network of more than 5,000 independent franchise stores. “We think that this foundational narrative is a lie,” Blue Orca said, claiming that hundreds of outlets are secretly owned and operated by its executives or individuals closely connected with the chairman.

The report also claimed Miniso is a brand in decline, with revenues down 40 percent from a pre-initial public offering peak, extensive pre-Covid store closures, and franchise fees that have fallen 63 percent over the past two years.

Miniso had closed 850 stores in China, or more than a third of its total in the country, even before the pandemic started, the report cited Chinese media as saying. “Our months-long investigation corroborates this trend,” Blue Orca said.

Editors: Emmi Laine, Xiao Yi