Winsway Denies Short-Seller’s Allegations Company Overstated Coal Imports
Winsway Coking Coal Holdings Ltd. (1733), which processes and transports coal to China from Mongolia, denied allegations from a short seller that imports were less than the company reported.
“Winsway is absolutely not a fraud,” as was alleged in a report from Jonestown Research, Chief Financial Officer Jerry Xie said yesterday on a call with investors. The Hong Kong-based company received the report yesterday that includes other allegations and may not have come from a “reputable” group, he said. Winsway slid 8.6 percent yesterday.
Scrutiny of accounting standards of Chinese companies intensified last June when short seller Carson Block’s Muddy Waters LLC alleged Sino-Forest Corp. overstated its assets and cash. Short sellers have targeted other Chinese companies including vegetable producer Chaoda Modern Agriculture Holdings Ltd. (682) and software maker Longtop Financial Technologies Ltd. (LGFTY)
Winsway’s decline “was triggered by a sell report written by an unknown research house,” Helen Lau, a Hong Kong-based analyst with UOB Kay Hian, wrote in a note to clients. “Hedge funds therefore took this excuse to short it down.”
Winsway rescheduled a conference call with investors to 8:30 a.m. Hong Kong time today instead of at 10 p.m. yesterday, Xie said.
“We need a little more time to prepare the numbers,” Xie said in a telephone interview.
Winsway fell to HK$1.91 at the close yesterday in Hong Kong, its biggest decline since Oct. 3. There were 65.3 million shares traded, compared with the three-month average of 9.8 million, according to data compiled by Bloomberg.
Coal Takeover
Winsway will proceed with its planned purchase of Canadian metallurgical-coal producer Grande Cache Coal Corp. (GCE), Xie said. It agreed in October to buy the miner with Japan’s Marubeni (8002) Corp. for C$1 billion ($990 million) to take advantage of surging demand from steel producers in China.
Grande Cache, based in Calgary, fell 5.7 percent to C$9.35 at the close yesterday in Toronto.
“Grande Cache Coal has no reason to believe that there is any merit to the allegations,” the company said yesterday in a statement. Grande Cache “has been assured by Winsway that the report is entirely without merit.”
InvestDOOR, the website that published the Jonestown Research report, didn’t respond to e-mail queries, and the report didn’t have any information on the writers. There also didn’t appear to be any results on a research firm named Jonestown Research using Google Inc.’s Internet search engine.
Companies Targeted
Carolyn Quick, a spokeswoman for TMX Group Inc., owner of the Toronto Stock Exchange, declined to comment on the issue, citing company policy not to discuss individual companies.
Reports alleging inaccurate reporting and fraud at companies with operations in China have had a mixed record.
Silvercorp Metals Inc., the Vancouver-based mining company that faced fraud allegations in August, said in October a forensic investigation by accounting firm KPMG LLP found the assertions in two anonymous reports were untrue. In September, the miner with operations in China sued two websites and their operators for allegedly spreading false information in an effort to drive down the company’s stock price.
China vegetable supplier Chaoda, which plunged more than 80 percent last year in Hong Kong, delayed its annual earnings release on Sept. 30 to audit its accounts after a report from Anonymous Analytics questioned its finances. The shares were suspended Sept. 26.
Longtop Delisted
Longtop Financial’s shares plunged and were eventually delisted in the U.S. after Citron Research and OLP Global LLC alleged the company inflated profit margins by hiding expenses and underpaying employee benefits.
Winsway hadn’t been contacted by Hong Kong’s bourse, Xie said. Ernest Kong, a spokesman for the city’s Securities and Futures Commission, declined to comment when reached yesterday by telephone.
Jonestown said in its report it’s betting that shares of both Winsway and Grande Cache will decline. In short selling, investors sell borrowed shares in anticipation that the securities will decline and they can buy them back at a profit.
Winsway uses so-called intermediaries to import coal and that may account for differences in Winsway’s own accounts and Chinese import data as alleged in the report, Xie said.
‘By the Book’
“Everything we have done is done by the book,” he said.
Winsway’s transportation company in Mongolia, Moveday, used to be part of the company and is “not legally attached” anymore after it was spun off before Winsway’s initial public offering in 2010, Xie said. Moveday is an “undisclosed related party,” Jonestown said in the report.
Winsway has four suppliers in Mongolia, including Mongolian Mining Corp. (975) and SouthGobi Resources Ltd. (1878), Xie said. It counts China Minmetals Co. and Marubeni as its customers, he said. Ma Jun, a spokesman of China Minmetals, said he has no information about Winsway as the company has many suppliers.
There are eight “buy” ratings on Winsway, three “holds” and no “sells,” according to data compiled by Bloomberg. Winsway started trading in October 2010 after selling shares at HK$3.70 a piece, raising HK$3.66 billion ($470 million) in its IPO.
To contact the reporters on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net
To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net
“Winsway is absolutely not a fraud,” as was alleged in a report from Jonestown Research, Chief Financial Officer Jerry Xie said yesterday on a call with investors. The Hong Kong-based company received the report yesterday that includes other allegations and may not have come from a “reputable” group, he said. Winsway slid 8.6 percent yesterday.
Scrutiny of accounting standards of Chinese companies intensified last June when short seller Carson Block’s Muddy Waters LLC alleged Sino-Forest Corp. overstated its assets and cash. Short sellers have targeted other Chinese companies including vegetable producer Chaoda Modern Agriculture Holdings Ltd. (682) and software maker Longtop Financial Technologies Ltd. (LGFTY)
Winsway’s decline “was triggered by a sell report written by an unknown research house,” Helen Lau, a Hong Kong-based analyst with UOB Kay Hian, wrote in a note to clients. “Hedge funds therefore took this excuse to short it down.”
Winsway rescheduled a conference call with investors to 8:30 a.m. Hong Kong time today instead of at 10 p.m. yesterday, Xie said.
“We need a little more time to prepare the numbers,” Xie said in a telephone interview.
Winsway fell to HK$1.91 at the close yesterday in Hong Kong, its biggest decline since Oct. 3. There were 65.3 million shares traded, compared with the three-month average of 9.8 million, according to data compiled by Bloomberg.
Coal Takeover
Winsway will proceed with its planned purchase of Canadian metallurgical-coal producer Grande Cache Coal Corp. (GCE), Xie said. It agreed in October to buy the miner with Japan’s Marubeni (8002) Corp. for C$1 billion ($990 million) to take advantage of surging demand from steel producers in China.
Grande Cache, based in Calgary, fell 5.7 percent to C$9.35 at the close yesterday in Toronto.
“Grande Cache Coal has no reason to believe that there is any merit to the allegations,” the company said yesterday in a statement. Grande Cache “has been assured by Winsway that the report is entirely without merit.”
InvestDOOR, the website that published the Jonestown Research report, didn’t respond to e-mail queries, and the report didn’t have any information on the writers. There also didn’t appear to be any results on a research firm named Jonestown Research using Google Inc.’s Internet search engine.
Companies Targeted
Carolyn Quick, a spokeswoman for TMX Group Inc., owner of the Toronto Stock Exchange, declined to comment on the issue, citing company policy not to discuss individual companies.
Reports alleging inaccurate reporting and fraud at companies with operations in China have had a mixed record.
Silvercorp Metals Inc., the Vancouver-based mining company that faced fraud allegations in August, said in October a forensic investigation by accounting firm KPMG LLP found the assertions in two anonymous reports were untrue. In September, the miner with operations in China sued two websites and their operators for allegedly spreading false information in an effort to drive down the company’s stock price.
China vegetable supplier Chaoda, which plunged more than 80 percent last year in Hong Kong, delayed its annual earnings release on Sept. 30 to audit its accounts after a report from Anonymous Analytics questioned its finances. The shares were suspended Sept. 26.
Longtop Delisted
Longtop Financial’s shares plunged and were eventually delisted in the U.S. after Citron Research and OLP Global LLC alleged the company inflated profit margins by hiding expenses and underpaying employee benefits.
Winsway hadn’t been contacted by Hong Kong’s bourse, Xie said. Ernest Kong, a spokesman for the city’s Securities and Futures Commission, declined to comment when reached yesterday by telephone.
Jonestown said in its report it’s betting that shares of both Winsway and Grande Cache will decline. In short selling, investors sell borrowed shares in anticipation that the securities will decline and they can buy them back at a profit.
Winsway uses so-called intermediaries to import coal and that may account for differences in Winsway’s own accounts and Chinese import data as alleged in the report, Xie said.
‘By the Book’
“Everything we have done is done by the book,” he said.
Winsway’s transportation company in Mongolia, Moveday, used to be part of the company and is “not legally attached” anymore after it was spun off before Winsway’s initial public offering in 2010, Xie said. Moveday is an “undisclosed related party,” Jonestown said in the report.
Winsway has four suppliers in Mongolia, including Mongolian Mining Corp. (975) and SouthGobi Resources Ltd. (1878), Xie said. It counts China Minmetals Co. and Marubeni as its customers, he said. Ma Jun, a spokesman of China Minmetals, said he has no information about Winsway as the company has many suppliers.
There are eight “buy” ratings on Winsway, three “holds” and no “sells,” according to data compiled by Bloomberg. Winsway started trading in October 2010 after selling shares at HK$3.70 a piece, raising HK$3.66 billion ($470 million) in its IPO.
To contact the reporters on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net
To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net
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