Seek (ASX: SEK) and Blue Orca Capital have traded blows following the publication of a report by Blue Orca alleging that Seek’s Zhaopin job board in China is inundated with fake postings and which led to a trading halt on SEEK’s shares last week.

This morning, Seek published a two-page rebuttal to Blue Orca’s report. In it, the company stated that “Zhaopin strives to be an industry leader in dealing with fake ads and candidate CVs which do unfortunately occur on all online employment marketplaces globally. Zhaopin has strict processes in place to verify and onboard customers and provide candidates with fresh and relevant opportunities. Some negative examples can be found on any online employment marketplace but the assertions made in the Report are greatly exaggerated and misleading”.

Seek also stated that it strongly disagrees with the report’s assertions regarding SEEK’s accounting practices and supposed failure in complying with IFRS.

Andrew Bassat, CEO and Co-Founder of Seek said, “We accept that market participants have different opinions, however this report is littered with inaccuracies. We are well positioned for future growth and remain confident in SEEK’s long-term outlook.”

Based in Texas, Blue Orca Capital is an activist investment firm that has a track record of aggressively shorting stocks since it was founded in 2018.

Following Seek’s response to its allegations, Blue Orca claimed that Seek has failed to meaningfully address any of the substantive evidence of “fake posts and zombie resumes” raised in its report. They claimed that, “Seek’s actions speak louder than its words. 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. Recall that in the markets we sampled, these employers accounted for almost 20% of the posts on these platforms, making it a significant admission of rot on Zhaopin”.

Soren Aandahl, Chief Investment Officer at Blue Orca told Business News Australia why his company had targeted Seek: “Well we first noticed it because it's a roll-up, and like a lot of roll-ups it had a high amount of debt. And then, it had really low earnings quality which is kind of just a fancy finance term for a lot of their net profits in any given year weren't driven by the underlying business - it was driven by one-time non-cash gains, which is always a red flag.”

Blue Orca has taken a particular interest in Chinese companies and Aandahl appears in the 2018 film, The China Hustle , a documentary about systematic and formulaic decades-long securities fraud by Chinese companies listed on the US stock market.

Aside from its operations in Australia, Seek has strong market positions in Asia and South America and is the 3^rd largest online job advertising firm in the world based on revenue according to SIA’s Online Job Advertising 2020 Market Update.

SEEK’s shares held up reasonably well following the lifting of the trading halt today, dropping just 0.84% at AUD 21.33 (USD 14.98) at the close of market, however this still represents a fall of 7.3% from AUD 22.99 (USD 16.14) on 28 October, the day before Blue Orca’s report was published.