Perfect World Shares Jumped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online game maker Perfect World (NAS: PWRD) jumped 16% today after the company responded to allegations of fraud.

So what: On Monday shares took a dive after a blog on Tianya, a Chinese social-networking site, alleged an investigation was ongoing at the company. Today the company responded with a "firmly and forcefully" written nine-point press release. Maybe the most notable thing is that an independent audit committee of the company's board has been reviewing the allegations and independent legal counsel will assist in the review.

Now what: This kind of response is exactly what you want from management when accusations are brought up, although I'm not sure the words "firmly and forcefully" will help convince anyone. Investors are still worried any time fraud is brought up in relation to Chinese small-cap companies because too often it has proved to be true. Since I don't know which side to believe, I'll enjoy my seat on the sidelines and let the bears and bulls battle it out in the market. If past experience is any indication, it could be a long, drawn-out battle.

Interested in more info on Perfect World? Add it to your watchlist byclicking here.

At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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