Kai-Fu Lee, Citron battle heats up

However, Citron, which refuted Lee's accusations, questioned Lee's motive. In a post on its website, Citron said both Qihoo 360 and its lead investor Sequoia Capital are investors in Lee's Beijing-based technology incubator Innovation Works.

"Is Kai-Fu Lee voicing an objective opinion, or just using his reach on Weibo to support his major investors, regardless of the truth?" the post asked.

In response to Citron, Lee said Qihoo is not an investor in Innovation Works, but the smallest passive corporate investor in a fund that Innovation Works co-manages with about 80 other investors.

The showdown has sparked debate among netizens, with some supporting Lee's stance and others questioning the financial transparency of US-listed Chinese companies.

Short-sellers did help expose fraud and companies with problems, but now they have gone too far to go after innocent companies, a netizen wrote on Sina Weibo, China's most popular microblogging platform.

However, some netizens said that rather than online condemnation, a lawsuit would be the best choice for Chinese companies to protect their legitimate rights and interests.

Short-sellers usually borrow shares to sell them in hopes of buying them back at a lower price, turning a profit from the price difference. Their attacks and relative investigations have triggered a growing wave of Chinese companies delisting from the US stock market.

In a recent case, Focus Media, a Chinese outdoor advertising group, announced last month that it planned to delist itself from NASDAQ in a deal potentially worth $3.5 billion offered by a group of equity fund managers.

Focus Media's shares were hit hard last year following a negative review released by short-selling firm Muddy Waters.