Chinese property developer Evergrande Real Estate Group (恆大地產集團) yesterday denied a short-seller’s research report accusing it of accounting tricks and bribes to hide insolvency. The developer’s shares were down 11 percent in Hong Kong.
Evergrande said in a brief statement to the Hong Kong stock exchange that it would make a further clarification announcement “in due course.”
The company, one of China’s largest property developers, was responding to a Citron Research report released the day before.
The report accused Evergrande of using fraudulent accounting, overstating its cash, inflating the value of its assets and under-reporting the cost of land. Citron also said Evergrande’s chairman has bogus credentials.
Citron, based in Los Angeles, publishes reports online about companies it believes are misleading investors and bets their share prices will fall.
The firm has released reports with similar allegations on more than a dozen other Chinese companies.
Evergrande said its cash flow is sufficient and denied Citron’s allegations that it has acquired land illegally, the Securities Times reported yesterday, citing Citron chairman Hui Ka Yan (許家印) as saying on an investor call. The company’s directors will consult with lawyers, the report said, quoting Hui.
The 57-page report by Citron, which elicited a denial, but few details from Evergrande, jolted traders.
“It’s one of the biggest developers, so it’s a little shocking. That caused the entire line of mainland developers to fall sharply,” Hong Kong-based Lyncean Holdings managing director Francis Lun (藺常念) said.
Shares in the Guangzhou-based developer dived 11.4 percent to HK$3.97. The news affected other developers, with China Resources Land Ltd (華潤置地) slumping 5.3 percent to HK$14.96 and China Overseas Land & Investment Ltd (中國海外發展公司) off 3.9 percent at HK$16.60.
Chinese companies, many traded in the US, have over the past year been involved in a spate of scandals involving accounting irregularities.
Most notably, Sino-Forest Corp (嘉漢林業) filed for bankruptcy last year after being accused by Muddy Waters Research of overstating its timber holdings in China.