(Yicai Global) Nov. 19 -- Joyy’s shares plunged in New York as short-seller Muddy Waters charged the Chinese social media platform with fraud just days after Baidu agreed to buy its live broadcast business in China for USD3.6 billion.

Joyy [NASDAQ: YY] closed 26.5 percent lower yesterday at USD73.66, after retreating almost as much as 30 percent. In after-hours trading, the stock recovered some ground, gaining as much as 16.5 percent.

In a report published yesterday, Muddy Waters branded the Guangzhou-based company’s YY Live business, which Baidu is set to acquire, as an “ecosystem of mirages” that was “almost entirely fake.” YY Live is 90 percent fraudulent, the notorious US short seller said, adding that its international live-streaming business, Bigo, also seems barely more real.

Joyy said in response that Muddy Waters knows nothing about the live-streaming sector. The report is illogical and contains many errors, it said in a statement. Baidu did not immediately comment on the allegations.

Baidu confirmed on Nov. 16 that the Beijing-based internet giant plans to further develop its non-advertising business by buying YY Live. The USD3.6 billion cash offer will enable Baidu to expand its know-how in video-based social media, according to founder and Chief Executive Robin Li. The deal is expected to close in the first half of next year.

Shares of Baidu [NASDAQ: BIDU] also fell in New York, closing 1.3 percent lower at USD142.07 yesterday. In after-hours trading, the stock fell as much as 3 percent and changed hands at USD139.20, down 2 percent, as of 4.09 a.m. local time.

Muddy Waters said YY Live’s “supposedly high-earning performers in reality take home only a fraction of their reported totals. The purportedly independent channel owners are largely controlled by YY in order to facilitate continuous sham transactions.

“The legions of benefactor fans are almost entirely bots operating from YY’s internal network (~50% of YY Live gift volume), bots operating from external bot farms, and performers roundtripping gifts to themselves,” the report said.

Editor: Ben Armour