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China Huishan Dairy halts trading after short seller report
December 16, 2016 / 4:19 AM / a year ago

China Huishan Dairy halts trading after short seller report

SHANGHAI, Dec 16 (Reuters) - China Huishan Dairy suspended trading on Friday after a report from U.S.-based short-seller Muddy Waters questioned the firm’s profits and said it had inflated spending on its cattle farms to artificially raise capital expenditure figures.

Shares in Huishan Dairy - which carried out a $1.3 billion listing in Hong Kong in 2013 - were suspended down 2.14 percent on Friday morning. The shares recouped some losses in morning trade after having dropped as much as 4.3 percent to their lowest in more than a year.

Muddy Waters said it believed the Chinese dairy to be worth “close to zero” because it had misrepresented its self-sufficiency on alfalfa used as feed for cattle, was over-leveraged and had overstated its spending.

An official in Huishan Dairy’s investor relations department said the firm was now going through the report and would later publish a response. He added the firm had seen a build-up of short positions in the last few weeks.

The official, who asked not to be named, said this was common practice for groups such as Muddy Waters.

“In the run-up, you get lots of related groups building up short-positions, then suddenly they’ll write their own report, something baseless, and get the stock price to fall,” he said.

Huishan Dairy posted revenues of 4.5 billion yuan ($647.9 million) in the year to end-March 2016, up 15 percent from the same period in 2015.

$1 = 6.9460 Chinese yuan Reporting by Adam Jourdan; Editing by Jacqueline Wong

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