LONDON (Reuters) - Cardiff University has defended its joint venture with Welsh technology company IQE that has been criticized by two hedge funds with short positions in the company’s stock.

IQE, whose technology is in the latest iPhone, suffered a 14 percent fall in its share price on February 5 after a report by hedge fund ShadowFall said its joint venture with Cardiff and a university in Singapore had inflated its profitability and cash flow.

Its shares fell a further 10 percent on February 8 after Muddy Waters Capital said IQE’s transactions with the Compound Semiconductor Centre (CSC), the joint venture with Cardiff University, were “not substantive, and the accounting is possibly designed to deceive investors.”

Muddy Waters, founded by well-known short-seller Carson Block, added it was concerned “that IQE might have taken advantage of Cardiff University”.

In response the university, which has contributed more than 20 million pounds ($27.58 million) to the project, said it rejected claims from ShadowFall and Muddy Waters that IQE had sold the joint venture equipment at inflated prices, saying the transactions were “all independently valued”.

The joint venture “applies corporate standards of governance including an independent chair, regular joint board meetings, annual reports and published accounts”, and staff members on CSC’s board, that include the university’s chief financial officer Rob Williams, were “appropriately qualified”, a spokesperson told Reuters.

“The university entered into the joint venture as a strategic investment to ensure our world-leading research has a well-founded route to commercialisation,” he added.

IQE has said ShadowFall’s analysis was “without merit”, while the information in Muddy Waters’ report was “either factually inaccurate or has previously been disclosed”.

Short interest in IQE has risen substantially over the last few months according to regulatory disclosures. Short sellers position themselves to profit when a share price falls.