* Shares sink to lowest since August 2015 after six-day halt
* Cogobuy denies short-seller allegations, files police report
* Lenders concerned about dividend payment proposal (Adds Cogobuy loan covenant, loss in market cap, recent short-seller attacks in Hong Kong)
By Donny Kwok and Elzio Barreto
HONG KONG, May 31 (Reuters) - Shares in Cogobuy Group tumbled as much as 26 percent on Wednesday upon resumption of trading after a six-day halt following a short-seller’s report that accused the Chinese e-commerce platform of improper accounting.
Blazing Research, a little-known research firm whose analysts were not identified, first issued a report last week accusing Cogobuy of improper accounting practices and saying that its platform, which sells electronic components, has minimal traffic. It said it may have taken an investment position on Cogobuy and could benefit from a decline in the stock.
Cogobuy’s stock sank 22 percent on May 22 following the report, prompting the company to request a trading halt. The share suspension raised concerns among some of the company’s lenders because of a potential covenant breach on a $194.5 million loan if trading had remained halted for more than seven days, Thomson Reuters Basis Point reported on Monday.
Had it breached the covenant, lenders could have demanded immediate payment, putting a strain on Cogobuy’s finances.
Cogobuy late on Monday rejected the report, saying the allegations were false and misleading. It said Blazing Research had not sought comment from the company.
The company added that it had reported the incident to the Shenzhen police and reserved all rights to take legal action against the authors of the report.
Blazing Research issued an additional report on Tuesday, rejecting Cogobuy’s rebuttal.
After initial gains, shares in Cogobuy closed 23 percent weaker at HK$5.98, after trading as low as HK$5.75 earlier, their lowest level since Aug. 25, 2015.
Adding to concerns among Cogobuy’s lenders, Kang Jingwei Jeffrey, the company’s controlling shareholder who is also its chairman and chief executive, proposed on Wednesday to bring a board resolution to have the company pay an interim or final dividend in 2017.
Cogobuy has not paid any dividends since its IPO in Hong Kong in 2014 and any payments would reduce available cash to meet debt payments.
“This is part of the company’s efforts to boost up its share price. However, it’s very bad news for banks,” said one Hong Kong-based banker, who was not authorized to discuss the matter publicly.
Cogobuy did not immediately reply to a Reuters request for comment on concerns raised by some of the lenders over the dividend payment.
Since the Blazing Research report was first published, Cogobuy’s stock has lost over 40 percent, wiping HK$5.65 billion ($725.5 million) of the company’s market value amid frenzied trading activity. Turnover had averaged HK$35.7 million a day over the past year till the trading halt, but jumped to HK$743.8 million on Wednesday.
Cogobuy is among a series of Hong Kong-listed companies that have faced claims from short-sellers in recent months, including China Huishan Dairy Holding Co Ltd, property and healthcare group Fullshare Holdings Ltd and AAC Technologies, which supplies Apple Inc with miniaturised acoustic components. ($1 = 7.7878 Hong Kong dollars) (Reporting by Donny Kwok and Elzio Barreto; Additional reporting by Yan Jiang from Thomson Reuters Basis Point; Editing by Edwina Gibbs and Muralikumar Anantharaman)