SPRD and Muddy WatersSource:
https://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/06/28/bloomberg1376-LNIBNS0UQVI901-291GCRMUUVPE47K5Q5SGHBC0U4.DTL
June 29(Bloomberg) -- Spreadtrum Communications Inc., the Chinese chip designerquestioned by short-seller Muddy Waters LLC over its accounting, said areport suggesting it misstated financial results is groundless.
"Their questions do not have any basis," Shannon Gao, chieffinancial officer at Shanghai-based Spreadtrum, said in a phoneinterview. Spreadtrum's auditor, PricewaterhouseCoopers, "showed strongsupport for us," Gao said.
Spreadtrum tumbled as much as 34 percent yesterday after the openletter by Carson Block's firm, whose report roiled shares of Sino-ForestCorp. this month. Chinese companies trading in North America have hadalmost $5 billion in market value erased since Muddy Waters' reportswere released, according to data compiled by Bloomberg.
Spreadtrum shares pared declines, closing down 3.5 percent in NewYork trading yesterday, after Needham Group Inc. and Chardan CapitalMarkets said the Muddy Waters assertions were overblown.
"It's unusual that the stock came back the way it did," said RobertLawton, managing partner of Catoosa Fund LP, a Los Angeles-based hedgefund that doesn't own the shares. "This guy has been pretty bulletproofin his research recently, so it takes a lot to move the stock backnearly where it started. It may be because the analysts pounded on thetable."
Sino-Forest
Sino-Forest, the timber company based in Hong Kong and Mississauga,Ontario, lost 71 percent in the two days after Block's firm said itoverstated assets.
China Yurun Food Group Ltd. tumbled 20 percent on June 27 onspeculation Muddy Waters would issue a negative report on the porkproducer. Yurun Chairman Zhu Yicai attributed the slump to "hedge fundsand market rumors" and said he wasn't aware of any plans for a report onYurun, said Titus Wu, an analyst at DBS Vickers Hong Kong Ltd., who wason a conference call with the company that day. Yurun climbed as muchas 9.4 percent today.
Orient Paper Inc. Chairman Liu Zhenyong, whose company was targetedby Muddy Waters last year, said in an interview this monthoverseas-listed Chinese companies should conduct investigations bythird-party independents to "shut others' mouths." After the MuddyWaters analysis that labeled Orient a fraud last June, the companyappointed Loeb & Loeb LLP, Deloitte & Touche Financial AdvisoryServices and TransAsia Layers to probe the allegations. That four-monthinvestigation found no evidence to support the short-seller's claims.
'Fraudulent' Companies
Quinn Bolton, an analyst at Needham, wrote in a report publishedduring regular trading hours yesterday in New York, that the MuddyWaters letter raised "nothing new." Bolton reiterated a "buy"recommendation and $30 stock-price estimate.
"Muddy Waters is taking advantage of its success in identifyingother fraudulent companies in China to raise questions about Spreadtrumin order to profit from its short position," the analyst wrote.
Spreadtrum has slumped 32 percent this year. The company was takenpublic in a June 2007 initial offering led by Morgan Stanley and LehmanBrothers Holdings Inc., with help from Needham and Piper Jaffray Cos.,according to data compiled by Bloomberg. It gained 236 percent in 2010and 452 percent in 2009 after falling as low as 67 cents in 2008, thedata show.
'High Risk'
Short selling, or the sale of borrowed stock to profit from adecline, rose to a record 14 percent of Spreadtrum's outstanding sharesas of June 24, up from 6.7 percent at the beginning of the month and 1.5percent at the end of 2010, according to Data Explorers, a NewYork-based research firm.
"We have identified a number of issues in Spreadtrum's filings, andwe believe that there is a high risk of material misstatements in thereported financials," Muddy Waters said in a letter addressed to thecompany's chairman, Leo L
Read more:
https://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/06/28/bloomberg1376-LNIBNS0UQVI901-291GCRMUUVPE47K5Q5SGHBC0U4.DTL#ixzz1Qfrf4SJa