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| +Paul Gillis |
Paul Gillis:
Tianhe asked the Hong Kong Stock Exchange to immediately suspend trading. That can be a smart strategy since it prevents the shorts from covering while they continue to pay for borrowed stock. Trading resumed a month later after the company responded to the 20 page AA allegations with a 55 page response alleging that AA had fabricated documents, forged signatures, and hacked email. Shares dropped 40% on resumed trading. The company and AA have since trad-ed insults but the stock remains down 54% from its high, suggesting investors believe AA over management.
One of the more interesting allegations (AA calls it the smoking gun) is that the company could not have paid the taxes they claim to have paid because they amount to more than the entire county in which the company is located collect-ed from all taxpayers. Tianhe has provided confirmation from the relevant tax bureaus that tax was paid, but AA has pointed out the statutory filings with the SAIC report a much smaller number.Paul Gillis explains in the rest of his post why short selling research group AA might have misrepresented this accounting issue, but describes it as a mistake, rather than a purpose to attack the chemical company.
More at the China Accounting Weblog.
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