Asia Plastic Recycling Holding Ltd (APR, 亞塑再生), which recycles plastic to make ethylene-vinyl acetate foam in China, yesterday said it will today file criminal charges against Glaucus Research Group California LLC for allegedly manipulating its share price.
“We have noticed that there were many irregular short selling orders filed before April 24, when Glaucus intentionally issued a report based on partial information against Asia Plastic,” Gary Hung (洪紹恆), a partner at Chien Yeh Law Offices (建業法律事務所), which provides legal services for APR, told reporters yesterday.
According to Hung, Glaucus violated Article 155 of the Securities and Exchange Act (證券交易法) by spreading rumors or false information with the intention of influencing the securities trading in Taiwan.
Shares of APR plummeted by the daily maximum limit over two consecutive sessions to close on NT$74.9 on Friday after Glaucus issued a report on Thursday claiming that APR has overstated its profit, revenue and capital expenditure.
With APR’s outstanding loans of NT$3.62 billion (US$119.52 million), Glaucus said in the report that the company’s share price should be zero.
On Saturday, Financial Supervisory Commission Chairman William Tseng (曾銘宗) said the company had launched an investigation into APR and launched a probe into whether the US-based short seller was involved in manipulation of the Taiwanese firm’s shares.
Incorporated in the Cayman Islands, APR recycles plastic bags and waste scraps to produce foam rubber products in China’s Fujian Province.
SUPPORT
To support its diving shares, APR is to implement a share buyback scheme from today over the next two months.
APR chairman Ting Chin-tsao (丁金造) said yesterday that the company and his family plan to purchase 1 million shares at between NT$60 and NT$90 each on the open market.
“Although we do not understand much about international short selling practice, we have a clear idea about the industry and our technology,” Ting said.
“We believe time will prove everything,” he added.
Citing tax records on a Chinese local government’s Web site, Glaucus suggests that the company’s profit was exaggerated 10 times because it paid taxes of only 28 million yuan to 80 million yuan (US$4.48 million and US$12.79 million) from 2010 through last year, which was 96 to 88 percent less than the amount of profit APR reported in Taiwan.
However, APR senior manager Gary Wang (王維民) said the tax records cited by Glaucus were only an estimate conducted by the local government.
The real amount of taxes paid by another company listed outside China on these records was six times higher than the estimate made in 2010 and three times higher than that of 2011, Wang said, without specifying which company.
INSPECTION
To help clarify the issue, APR yesterday brought all tax payment documents to the Taiwan Stock Exchange Corp for inspection.
Deloitte Taiwan partner Wu Chiu-yen (吳秋燕) said APR paid 397 million yuan in taxes from 2010 through last year.
“APR passed the auditing process conducted by accountants from Deloitte Taiwan, who went to China to check the company onsite,” Wu said.
Meanwhile, commenting on APR’s 33 percent earnings before the interest-and-tax margin, which is higher than 7 percent for other Chinese companies making ethylene-vinyl acetate foam, chief financial officer Mark Hsueh (薛又瑋) said the company is the only one that can produce ethylene-vinyl acetate foam from plastic scraps.
APR added that Ting’s family, the company’s management and employees had not traded APR’s shares between April 9 and April 16, when about 1.88 million shares changed hands.
Last year, Ting Chin-kuang (丁金礦), the chairman’s younger brother, sold some of his shares in APR to fund Jinfada (Fujian) Shoes Plastic Co (金發達), which the younger Ting founded, Hsueh said.
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