Some Chinese companies listed in the U.S. these days are like ducks in a shooting gallery.
Bloggers and financial Web sites take to target a growing number of recent IPOs Chinese for errors of accounting or outright fraud involving senior executives of the page.
Friday, shares registered in Toronto from Sino - Forest plunged 64% after that short-seller blogger site muddywatersresearch.com accused the operator of forest planting fraudulently exaggerate its assets of forestry. Which sparked a new round of selling in a variety of U.S. listed Chinese companies.
Sino-Forest accused Muddy Waters of defamation Monday. Muddy Waters, who has already contributed to exposing the problems China MediaExpress and Rino International, which have since been removed after virtually wipe shareholders, is not backing vocals.
Blogger attacks led to the Securities and Exchange Commission probes. U.S. exchanges have frozen or removed from the list of shares on a dozen companies focused on China since March in SEC investigations.
Many are small caps or microcaps merge with companies shell here to speak to the public via lists of "backdoor". The shots online often mixes with short-selling, causing these shares to certain days despite the absence of official news of the reservoir. The ghosts of investors and investment of cloud image.
There is big from the effects of training for investors since will keep surging U.S. IPOs by Chinese companies and these critics online will continue to the business impact.
Blogger and other sites making the charges include SeekingAlpha and research of lemon.
"We know (these bloggers) ne font not true, fair judicial investigations when they come out with these reports." "There are a lot of things (about Chinese companies) which is false, misleading, and the creation of a lot of negative feelings in the market," said Mitchell Nussbaum, President of the practice of emerging markets of New York law firm Loeb & Loeb, who represents Chinese companies at the United States "" on the other hand, it appears that some - but far from all these companies - have assume of Board of Auditors to a certain extent. ""
Bloggers Defiant
Bloggers are beaming by their rifles. "No allegation made on (alfredlittle.com) have never proven as false by the targeted companies," blogger Alfred little said in an e-mail interview. "So, what alfredlittle.com offers investors is a useful service." "And Yes, those who have quick access to the reports made death short-circuit updating phony stocks," said little, whose positions appear on SeekingAlpha.
The controversy is stirring calls for more reliable data of business Chinese. Late bilateral in Washington in may, US officials and China negotiations said they are seeking to tighten up the supervision of the corporate accounting "that provide services for audit of public enterprises in both countries."
Other targets of recent bloggers include Deer consumer products (NASDAQ: deer - News) and fertilizer and food maker Yongye International (NASDAQ: YONG - News).
On 23 May, the SEC opened an investigation of accounting Longtop Financial Technologies China (NYSE: LFT - News) after a search of lemon report in question his "non-conventional staffing model" stock gifts to employees and friends of the founder and alleged that Longtop had "margins supersized". Deloitte Touche Tohmatsu leaves also as auditor after accusing Longtop frameworks of collusion with its banks to hide its assets of real money. Longtop shares were halted since May 16.
"I don't work in concert with (shorts), I am a short-seller. "I'm a sell-side analyst," says founder of lemon left Andrew, who said he is "put out truthful information to the market".
Why some Chinese companies run defeat accounting errors after registration to the United States? Analysts say there are cases of deliberate fault. But David Chao, co-founder of DCM, a VC firm he active in China, said venture capitalist that some players strive to respect the date limit to comply with Sarbanes-Oxley accounting rules. Chinese companies have one year to comply with U.S. standards after the list of exhibits. But some found the costs and other difficult requirements.
Another issue is that companies Chinese which checks the books of Chinese firms U.S. appearing on the checklist and partner with the U.S. giant as KPMG are not subject to inspections by the Public Accounting Oversight Board of United States, as required under the Sarbanes-Oxley Act.
Fraud akin to Longtop, once a highly rated company presented by the IBD, have raised questions on the same well known businesses registered in the U.S.. Cabinet of the King of Fund hedge John Paulson owned 14% of the Sino-Forest, April 29. President of the ex - AIG Hank Greenberg have invested in the MediaExpress of la China.
Like many small Chinese stocks, investors are simply to output.
Janet Stites, editor of China knowledge, a newsletter online which allows to follow Chinese commercial enterprises on us financial markets, said a growing number of Chinese companies are considering legal action against bloggers.
Some are already in court. Deer consumer products brings a New York vs blogger trial, saying: it is part of a scheme to depress its stock exchange.
Sino clean energy (NASDAQ: EICS - News), a producer of coal-water slurry fuel, also said in early May that he goes for blog comments that he made about its sales and production figures.
Little fires back via email: "If the allegations were false, they should be easy to refute." Instead, the pattern that we have seen is the use of corporations to denials of coverage and the attacks, physical and moral. ?
Loeb & Loeb Nussbaum, said it will be more difficult to cook books going forward given the "conscience" of U.S. business audit.
In a context of blogger attacks and reporting errors mounted by companies in China, analysts say diligence is the key.
"Investors have to be very careful." "each company will not be like Baidu," said Chao of DCM.
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