Sino-Forest Delays Analyst Tour of China Facility to Await Panel’s Report

Sino-Forest Corp. (TRE), the tree- plantation owner targeted by short seller Carson Block, postponed an analyst tour of its Chinese operations until a committee reports on allegations it overstated production.

Sino-Forest said yesterday in a letter to investors and analysts that it will wait for the independent committee’s findings because “many” analysts who follow the company aren’t able to resume coverage or comment publicly until then. The committee may need two to three months to finish the task, the Hong Kong- and Mississauga, Ontario-based company said.

The tour “is certainly something people have been looking forward to,” Eric Yan, who helps manage about C$2.7 billion ($2.8 billion) at Matrix Fund Management Inc. in Toronto, said yesterday in a telephone interview. “I understand that many analysts have suspended their coverage, but postponing just adds to the uncertainty.”

Sino-Forest has tumbled 74 percent since the day before Muddy Waters LLC, a firm founded by Block, published a June 2 report that said the company exaggerated its timberland holdings. Sino-Forest rejected the allegations and commissioned the investigation, appointing PricewaterhouseCoopers LLP to assist. The analyst tour, which had been proposed for mid-July, was first announced by Sino-Forest on June 6.

“Management’s overriding priorities are to maintain the operations of the business and to support the work of the independent committee and its advisers,” Sino-Forest said yesterday in the letter.

More Information

Yan, who said he sold his Sino-Forest shares after the release of Muddy Waters’ report, said he is unlikely to buy the stock until more information about the plantation operator becomes available.

Paul Quinn, a Toronto-based analyst at RBC Capital Markets, said June 21 that the bank suspended coverage of Sino-Forest pending the findings of the investigation. He previously had an “outperform” rating on the stock. Richard Kelertas, an analyst at Dundee Securities in Montreal, suspended coverage on June 20. Kelertas had recommended buying the shares.

Sino-Forest fell 54 cents, or 10 percent, to C$4.75 at 4:16 p.m. yesterday in Toronto Stock Exchange trading, after earlier plunging 21 percent.

Sino-Forest has more than doubled in the past six trading sessions. The shares climbed 30 percent on July 4 after Wellington Management Co., the Boston-based investment firm that manages $663 billion, said in a regulatory filing it owned an 11.5 percent stake.

OSC Probe

Canada’s main securities regulator, which had said June 8 it was reviewing Sino-Forest, announced yesterday it began a “targeted review” of companies that operate in emerging markets and trade on the country’s exchanges.

The Ontario Securities Commission said in a statement it will examine the disclosures, auditing and underwriting of Ontario companies listed on Canadian markets that have a significant emerging-markets presence.

The Ontario regulator will decide after its review what law changes might be necessary to protect investors. It didn’t say how long it expects the probe to last or name Sino-Forest in its statement. The review will examine the disclosure of “certain issuers” and the vehicles through which those companies have accessed the Ontario market.

Chinese and U.S. officials will meet next week to discuss giving American securities regulators the right to investigate companies within China for the first time, said two Chinese officials with direct knowledge of the plans.

Representatives from the Securities and Exchange Commission and the Public Company Accounting Oversight Board will meet with counterparts from the China Securities Regulatory Commission in Beijing from July 11 to 12, said the officials, who asked not to be named because the talks are private.

To contact the reporter on this story: Christopher Donville in Vancouver at

To contact the editors responsible for this story: Simon Casey at

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