SHANGHAI Dec 16 China Huishan Dairy
suspended trading on Friday after a report from U.S.-based
short-seller Muddy Waters questioned the firm's profits and said
it had inflated spending on its cattle farms to artificially
raise capital expenditure figures.
Shares in Huishan Dairy - which carried out a $1.3 billion
listing in Hong Kong in 2013 - were suspended down 2.14 percent
on Friday morning. The shares recouped some losses in morning
trade after having dropped as much as 4.3 percent to their
lowest in more than a year.
Muddy Waters said it believed the Chinese dairy to be worth
"close to zero" because it had misrepresented its
self-sufficiency on alfalfa used as feed for cattle, was
over-leveraged and had overstated its spending.
An official in Huishan Dairy's investor relations department
said the firm was now going through the report and would later
publish a response. He added the firm had seen a build-up of
short positions in the last few weeks.
The official, who asked not to be named, said this was
common practice for groups such as Muddy Waters.
"In the run-up, you get lots of related groups building up
short-positions, then suddenly they'll write their own report,
something baseless, and get the stock price to fall," he said.
Huishan Dairy posted revenues of 4.5 billion yuan ($647.9
million) in the year to end-March 2016, up 15 percent from the
same period in 2015.
($1 = 6.9460 Chinese yuan)
(Reporting by Adam Jourdan; Editing by Jacqueline Wong)