China Daily: Companies Listed in the US Fight Claim by Short Seller

PRLog (Press Release) – Jul 19, 2011 – The China Daily, with a daily circulation of over 500,000  is the English language mouthpiece for the Chinese government, and is often used by the government as a guide to official policy.  It is generally acknowledged that the paper reflects the Communist Party’s policy.

This makes the front page story in the China Daily even more interesting.  The headline of the article was “Companies Listed in the US Fight Claim by Short Seller.” Just the fact that the story was on the front page leads one to the conclusion that the Chinese government is taking the accounting issues that have affected Chinese companies listed in the U.S., Canada, Hong Kong and Singapore very seriously. It also  confirms the importance of the foreign capital that the Chinese companies traded overseas have been able to attract, and that the Chinese government wants this flow of capital to continue.

Of greater importance is the fact that the story highlighted actions being taken by companies that have been attacked by short sellers.

One of the companies attacked by short sellers was Spreadtrum Communications.  The company saw its share price plunge almost 70 percent from $24 to $8 after a report was  published on June 28th by the research firm Muddy Waters.  The company’s shares have recovered and today the shares closed at $14.75.  Spreadtrum Communications had indicated that Muddy Waters allegations were groundless. Leo Li, the company’s CEO was quoted by the China Daily as saying that “Muddy Waters’ report lacks supporting material and Spreadtrum has solid fundamentals.”

In a Bloomberg Television interview, Carson Block, the CEO of Muddy Waters had hinted that he might have been wrong about Spreadtum Communications.

The China Daily story also stated,” …market watchers said that Spreadrum case has hurt the credibility of Muddy Waters and that the game of shorting Chinese stocks may soon come to an end.”

Hung Haizhou, the chief strategist at China international Capital Corp. (CICC) was also quoted as saying, “Companies 1916338565  such as Muddy Waters won’t have a long lasting impact on US listed Chinese companies, and we think that the turning point may soon emerge.”  Huang was also quoted as saying, “The activities of short sellers such as Muddy Waters will soon come to an end, and Muddy Waters may be faced with legal action by the Chinese companies if its claims are proven to be false.”

Friedland Capital provides corporate finance advisory services to publicly-traded and privately-held emerging growth companies worldwide to help them achieve their short-term capital goals, and to realize their long-term business objectives.

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