Chaoda Modern Agriculture (Holdings) Ltd., a Chinese vegetable supplier, said Chairman Kwok Ho and Chief Financial Officer Andy Chan dispute insider trading allegations by Hong Kong’s market misconduct tribunal.
The allegations aren’t made against the company, Chaoda Modern said today in a Hong Kong stock exchange statement. Kwok and Chan “do not accept” the allegations, it said.
Kwok, Chan, and Fidelity Management’s George Stairs were accused by Hong Kong’s financial secretary of insider trading, according to a notice released by the tribunal on Sept. 28. Kwok, who founded Chaoda, has a 19.6 percent stake in the company, according to data compiled by Bloomberg.
“It is not expected that the proceedings will have any material effect on either the operations or financial position of the company or any of its subsidiaries,” Chaoda Modern said.
The financial secretary alleges the chairman and chief financial officer told Stairs about a June 2009 share placement three days before it was publicly announced, and the fund manager traded profitably as a result, according to the tribunal’s Sept. 28 notice. A further tribunal hearing is scheduled for Jan. 30.
Next Magazine alleged in a May 26 report that Chaoda exaggerated its farmland, which was denied by the company. The legal proceedings are “completely unrelated” to the Next Magazine report, the company said in today’s statement.
Chaoda’s shares were suspended from trading on Sept. 26, the day the misconduct proceedings were reported. They were first reported as being against the company, after a government spokeswoman said Chaoda was listed as the subject matter of a hearing at the tribunal. Shares will remain suspended until the company issues a statement to address a report by Anonymous Analytics, it said. The report questions Chaoda’s accounts.
Chaoda will delay releasing its annual results for the year ending June 30, which were expected today, to “include additional audit procedures” after reports from the media and Anonymous Analytics, the company said in a filing to the Hong Kong Stock Exchange today.
Chaoda said in the filing it would decide later when to release the results. Eric Yip of Christensen, which handles investor relations for Chaoda, said he does not know how long the additional auditing procedures will take and declined to elaborate on the filing.
The share suspension and allegations made by the report, which may affect the company’s future funding and expansion plans, are “of more immediate concern” than the insider-trading accusations, Ken Chan, a Hong Kong-based senior analyst at Moody’s Investors Service, said in a report today.
Reports by “whistleblowing” short sellers including Muddy Waters LLC and Anonymous Analytics can “severely influence debt and equity prices” and limit funding sources for the company, Fitch Ratings Ltd. said in a report yesterday.