'Unsubstantiated': Seek hits back amid fake job ad scandal

Jessica Yun
·5-min read
Seek has been hit with claims of false job ads. (AAP Image/David Mariuz)
Seek has been hit with claims of false job ads. (AAP Image/David Mariuz)

Updated: 2 November 2020

Seek has defended itself against claims of fake job posts, “dangerous” levels of debt and inflated profit figures, arguing the claims from US-based activist investment firm Blue Orca were “inaccurate”, “self-serving” and “unsubstantiated.

Blue Orca’s report released last week stated a high proportion of job listings posted by a top Chinese recruitment platform owned by Seek were fake, made by companies that weren’t real or de-registered, and the platform’s earnings puffed up.

Seek paused trading on at 12:11pm AEDT last Wednesday, but has resumed trading today. As at 12:10pm AEDT, the stock price of ASX-listed company had fallen by 5.81 per cent.

Seek has today argued the report “contains many inaccurate statements”.

“We believe the goal of the report is to use speculative assertions to generate adverse publicity and then draw Seek into a public debate, which is consistent with the usual practice of short-seller firms,” it said.

The job advertising platform “do[es] not wish to engage with the self-serving and unsubstantiated claims in the report,” the statement continued.

Blue Orca’s report found that the Chinese platform, Zhaopin, was “flooded” with fake job ads and resumés – but Seek argued that this was common across “all online employment marketplaces globally”.

“Some negative examples can be found on any online employment marketplace but the assertions made in the Report are greatly exaggerated and misleading,” said Seek.

Blue Orca responds

The US short-seller has already issued a counter to Seek’s response, describing it as “flimsy”.

“Seek even admitted in its Response that it did ‘not wish to engage in detail’ with our allegation. Why not? Because we are right,” it said.

“Since our report, Zhaopin has removed 64 of the 66 employers on its platforms we identified as likely fake, which we believe is clear validation of our work.

“In our opinion, Seek refuses to engage with our Report because our evidence is compelling.

“If Zhaopin has really generated so much free cash flow, why does Zhaopin’s indebtedness keep increasing?”

Blue Orca is a short-seller, meaning it makes money by betting against companies.

28 October 2020: ‘Rotten’: SeeK hit with fake job post claims

Australian recruitment firm Seek has been hit by multiple claims of “fraudulent” job postings, a “dangerous amount of debt” and “dubious” inflated profit figures.

The claims, made in a new report by activist investment firm Blue Orca Capital, said the fake job listings were posted by companies that were in fact deregistered, in liquidation, or had been flagged by Chinese authorities as “abnormal operations”.

The falsified job ads were discovered on Zhaopin, a Chinese recruitment platform owned by Seek.

Zhaopin accounts for nearly half (48 per cent) of the ASX-listed company’s consolidated revenue.

“Our investigation suggests that Seek is a flat-growth Australian platform rolled up with a fading Chinese online recruiting platform besot by fake resumes and fake job postings,” Blue Orca’s report stated.

The report sent Seek stocks plummeting 5.91 per cent on Thursday after the release of the report until it paused trading at 12:11pm AEDT.

(Source: Yahoo Finance)
(Source: Yahoo Finance)

Seek also issued a statement to the ASX that announced a temporary pause in trading “pending a further announcement”.

Zhaopin inflated Seek’s profits

Seek attempts to represent Zhaopin as Australia’s top recruitment platform in China – but Blue Orca analysis found its popularity was on par with rival Chinese recruitment platform 51jobs.

Zhaopin was also second to recruitment platform BOSS, which had 60 per cent more active users than Zhaopin.

“Seek is a roll-up of flat-growth online recruiting platforms and a supposedly fast-growing Chinese platform, Zhaopin, which Seek claims is the #1 player in China. We think this picture is false,” the report said.

“On paper, Seek appears profitable. But look closer and such paper profits were facilitated by dubious non-cash gains and questionable step-up transactions with related parties.

“From FY 2015-2018, Seek reported cumulative fair value gains of $336 million. Except for FY 2016, non-cash gains made up 26-41 per cent of Seek’s annual profits.”

Blue Orca noted that the share price of Seek at the close of Wednesday 28 October 2020 was $22.86, but valued the stock at $7.20.

“We think Zhaopin’s platform is rotten, which is devastating for Seek’s prospects,” the report said.

“Rather than valuing Seek as a fast-growing online recruiting platform, we value Seek for what it is—a slow-growth platform whose core business is shrinking and that carries a dangerous amount of debt.”

Yahoo Finance reached out to Seek for comment but they did not respond before publishing.

Fake job ads, false resumes

Blue Orca analysis of Zhaopin job ads from three random major Chinese cities revealed a “disproportionate” number of job posts were from the cities’ top 100 companies.

Hundreds of job listings were also made by companies that had no website or WeChat account.

“Many of these businesses were simply uncontactable. In another instance, when we called, the employer denied ever posting for positions on Zhaopin,” the report said.

“In other instances … companies we called about their job postings on the website even stated directly that the posts were fraudulent.”

Blue Orca’s research also found a whistleblower claim from a Chinese college student who said Zhaopin paid people to submit fake resumes.

The fraudulent listings, which are supposed to be posted by Zhaopin customers, have consequences because it challenges the legitimacy of Zhaopin’s reported revenues, and also signals Zhaopin’s falling popularity.

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