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Why Stock Fell Wednesday

By Daniel Sparks - Sep 5, 2018 at 4:30PM

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Allegations against's CEO, which the executive denies, continue to weigh on the stock.

What happened

Shares of Chinese specialty retailer and e-commerce company (JD 1.82%) were hit hard on Wednesday, falling as much as 11.6%. The stock closed the day down about 10.6%.

The stock's decline comes as more details about allegations against CEO Liu Qiangdong surfaced on Wednesday. Though Liu continues to deny the allegations -- he was arrested on suspicion of rape and released soon after and no charges have been filed -- investors are concerned nevertheless.

A chalkboard sketch of an arrow heading down.

Image source: Getty Images.

So what

Liu was arrested in Minnesota last Friday and released on Saturday. Initially, the arrest was reported to have been based on allegations of "sexual misconduct." But now The Wall Street Journal says the Minneapolis police told the newspaper the arrest was based on suspicion of rape. Further, the police's investigation continues, according to the Journal [subscription required].

But Liu and his attorney are fervently denying allegations.

"There is no believable or credible evidence that he has done anything wrong and he denies any wrongdoing," Liu's attorney, Earl Gray, told the Journal. No charges have been filed.

An article published Wednesday by The Wall Street Journal included more details about the allegations.   

Now what

Whether or not the allegations prove to be true, the negative press could have a material impact on business.

The stock had already been getting hammered recently, despite strong underlying business performance. Some investors fear how a potential trade war with China could impact JD.

Shares are down about 37% year-to-date.

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