Huazhu (Nasdaq: HTHT)-(HKEX: 1179)

On September 22, 2020 we published our report (the “Report”) which presented evidence why we believe Huazhu Group Limited (Nasdaq: HTHT)(HKEX: 1179) (“Huazhu” or the “Company”) is a real company that lied about the ownership of its hotel portfolio to produce fake financials.

On September 28, 2020 Huazhu filed a clarification announcement (“Huazhu’s Response”) which categorically denied all of our allegations without providing any substantive evidence to refute the facts presented in our Report.

In this Rebuttal we highlight additional evidence showing Huazhu lied about current Huazhu Directors secretly owning and operating Huazhu portfolio hotels. We found Dianping included a link to nearly 100% of the operating license for each Huazhu portfolio hotel. Bonitas Fieldwork confirmed that the displayed on-site operating license matched the Dianping hotel linked image for 100% of our fourteen-hotel sample size.

We counted 1,258 hotels with operating licenses registered to Huazhu subsidiaries and an additional 694 hotels owned and operated by undisclosed current Huazhu employees and other undisclosed related parties (“off-book hotels”).

Huazhu’s Response dismissed the Dianping dataset as outdated and inaccurate.

Huazhu failed to explain away obvious shareholder records that current Huazhu Directors own and operate supposed independent Huazhu franchisee hotels and are listed as approved construction contractors.

Huazhu’s Response dismissed current employees as unrelated parties.

We do not understand how Huazhu denies such obvious connections with current Huazhu Directors.

Chinese State Administration of Industry and Commerce (“SAIC”) records revealed Huazhu understated its SEC reported employee count by at least 16%.

Huazhu’s Response dismissed the SAIC dataset as outdated and inaccurate.

Our analysis of 47 different credit reports suggested that Huazhu’s actual PP&E was significantly lower than reported in Huazhu’s filings. We are confident in the accuracy of credit reports and encourage others to obtain them when conducting their own due diligence.

Huazhu’s Response simply dismissed the legitimacy of credit reports.

As further smokescreen, Huazhu named its CFO, its Audit Committee Chairman and its Secretary to a “Special Committee” to review our allegations. How does the Company’s own Audit Committee conduct any sort of “independent investigation” into our allegations?

We believe that Huazhu duped its auditor, Deloitte Touche Tohmatsu (Shanghai & Hong Kong) (“Deloitte”), into using a limited list of relevant consolidated operating entities. Deloitte’s audit work failed to verify ownership of Huazhu’s hotel portfolio and will remain notorious for its inability to accurately audit a laundry list of US-listed Chinese frauds since 2010.

We encourage the appointment of an independent auditor to simply confirm who owns and operates Huazhu’s hotel portfolio.

To us, the facts are clear. We stand by the quality of our work and remain short because we believe Huazhu generated significantly less profit and held significantly less PP&E assets than reported in both its SEC filings and HKEX Global Offering.