Chaoda Modern Facing Second Hearing in Hong Kong Market Misconduct Probe
Chaoda Modern Agriculture Holdings Ltd. (682), the Chinese food producer whose shares were suspended on Sept. 26 after slumping 27 percent, faces a second hearing at Hong Kong’s Market Misconduct Tribunal today.
The Hong Kong government and three other parties will be represented at the 5 p.m. hearing, tribunal secretary William Chow said. Chairman Michael Lunn will preside. Eric Yip of Christensen, which handles investor relations for Chaoda, didn’t respond to a request for comment today.
The company’s market value has been cut by HK$11.9 billion ($1.5 billion) since a May 26 magazine report alleging it exaggerated its farmland. Chaoda denied the report and said it would sue the publisher Next Magazine. Chaoda’s lawyers were preparing a price-sensitive announcement to Hong Kong’s stock exchange, Yip had said on Monday.
Increased scrutiny of Chinese companies including Toronto- listed Sino-Forest Corp. (TRE), accused of fraud by short-seller Muddy Waters LLC, has driven down the Bloomberg Chinese Reverse Mergers Index down 58 percent this year.
Chaoda’s fall on Sept. 26 came after the tribunal proceedings were first reported. The panel hears civil cases involving six offenses: including price rigging, false trading, insider trading, disclosure of information about prohibited transactions, disclosure of false information inducing transactions, and stock market manipulation, according to its website.
A spokeswoman for the Financial Secretary’s office, Shirley Wong, declined to give details on the allegations yesterday. Securities and Futures Commission spokesman Jonathan Li also declined yesterday to comment on the regulator’s involvement in the case.
Chaoda grows 150 types of crops at 31 production bases across 13 Chinese provinces, according to its website. The company employs 23,000 people and owns over 44,282 hectares of farmland.
Macquarie Group Ltd. analysts said in a June 9 report that the company hadn’t exaggerated the size of its assets after visiting some of the company’s production bases. The company bought back 13 million shares in late May. Chairman Kwok Ho also bought 2 million shares.
Founded in 1994 by Kwok, Chaoda first listed in Hong Kong in 2000. Kwok, 55, is a member of the Chinese People’s Political Consultative Conference, China’s top political advisory body, and has a 19.6 percent stake in the company, according to data compiled by Bloomberg..
Chaoda canceled plans to sell bonds in May, citing market conditions. It raised HK$1.17 billion in a share sale in August, 2010, according to data compiled by Bloomberg.