Sino-Forest Corp., the Chinese tree-plantation owner targeted by short-seller Carson Block, dropped as much as 27 percent in Toronto after a newspaper said the company may have overstated the value of its holdings.
The shares fell 48 cents to C$2.71 as of 9:44 a.m. on the Toronto Stock Exchange. Sino-Forest, whose biggest shareholder is hedge-fund firm Paulson & Co, has tumbled 85 percent since Muddy Waters LLC, a research firm founded by Block, said in a report published June 2 that the Hong Kong- and Mississauga, Ontario-based timber company exaggerated its holdings.
“Inconsistencies” have been found in the valuation of Sino-Forest’s holdings in China’s Yunnan province, Canada’s Globe and Mail said June 18, citing Chinese government officials and forestry experts it didn’t identify. A plantation where Sino-Forest bought timber rights in 2007 is smaller than the 200,000 hectares (494,000 acres) it claims, the Globe said, citing Xie Hongting, chairman of Gengma Forestry, which sold land to Sino-Forest, and a provincial forestry official the newspaper didn’t indentify.
Sino-Forest stands by the figure, the newspaper reported, citing a statement from the company, which said it bought 13,300 hectares directly from Gengma, and another 180,000 hectares from other sellers, using Gengma as a broker. The Globe’s report is an “incorrect portrayal” of the company’s business, Sino- Forest said today in a statement.
“There is no discrepancy” between Sino-Forest’s public disclosure of its 2007 agreement to acquire plantations in Yunnan and the description of the accord and related acquisitions provided to the Globe and Mail, Sino-Forest said in the statement.
Sino-Forest dropped 33 percent on June 14 after it posted first-quarter profit that missed analysts’ estimates. The company has set up an independent committee to investigate the allegations in the Muddy Waters report and appointed PricewaterhouseCoopers LLP to assist. Sino-Forest said last week it expects the investigation to take at least two to three months.
Subsidiary Greenheart Group Ltd. sank 12 percent in Hong Kong trading today after a 15 percent decline on June 17.
© Copyright 2014 Bloomberg News. All rights reserved.