China Zhongwang Holdings Ltd., a maker of aluminum products, said a short-seller’s allegations of fraud were false. Its stock dropped as much as 18 percent on resuming trade before paring losses.
China’s biggest producer of extruded aluminum, used in everything from window frames to subways, said late Wednesday that the claims by an anonymous research group were designed to manipulate its stock price. Its shares ended 12 percent lower at HK$2.90 in Hong Kong.
The accusations defy normal commercial logic, Zhongwang said in a statement to the Hong Kong stock exchange.
The stock was suspended on July 31 after a previously unknown group called Dupre Analytics published a report claiming, among other things, that the company used parties related to its chairman and founder to defraud investors and fabricate revenue. Zhongwang that day called the allegations groundless, noting that Dupre has a short position in its stock and would benefit from its decline.
“The company notes that the DA report has been published anonymously, and that the publisher itself does not appear to have a clear track record for issuing other analysis reports,” Zhongwang said Wednesday.
The report is Dupre’s first, according to its website. In an e-mailed response to questions on Aug. 1, signed “Dupre”, it said it would preserve its anonymity to protect its staff and that it began researching Zhongwang in 2014. It also said it doesn’t employ anyone past or present from Zhongwang or any other Chinese aluminum manufacturer.
Before resuming trade, the company’s stock was last at HK$3.31, down about 33 percent from this year’s peak in April. Of the four analysts who cover Zhongwang, two have buy ratings while the others grade it hold or neutral, according to data compiled by Bloomberg.
One of the analysts, Kevin Guo, senior vice president at Guotai Junan International Holdings Ltd. in Shenzhen, said by e-mail he will retain his buy on the company. He said he’s satisfied so far with Zhongwang’s response, although he said he believes the company may have to release more information on its customers.
Still, the uncertainty around Zhongwang is likely to continue to weigh on its stock price.
“Every company will of course come out to defend their position but whether this kind of statement can restore investor confidence is another story,” said Ben Kwong, a director at brokerage KGI Asia Ltd. in Hong Kong. “When a company is under this kind of negative comments share prices tend to continue to hover at low levels or even lower.”
Zhongwang was founded in Liaoning province in 1993 and makes products used in the transport, machinery and engineering industries, according to its website. Net income last year was about $400 million on revenue of more than $2.5 billion.
As of Wednesday’s close in Hong Kong, the city’s benchmark Hang Seng Index was down 2.9 percent over the period of Zhongwang’s suspension. Zhongwang held its initial public offering in 2009, raising HK$9.8 billion ($1.3 billion).