BEIJING, June 22, 2012 /PRNewswire-Asia/ -- Citron, an international professional short seller company, published a report with a very sensational conclusion on June 21: Evergrande Group, China's largest real estate company listed in Hong Kong stock market, is insolvent and has been reporting false information to investors in the past. This report suffered severe reprimands from the investors and Evergrande once it was published. The meaning of the report is shorting in the overseas-listed Chinese firms for profit. An original report by Sina Leju follows:
Deutsche Bank thought Citron allegations against Evergrande were invalid and Citron misunderstood clearly the basic operations of Evergrande.
According to the publicly available information, Citron was founded in 2007 and there was only one full-time employee, Andrew Lefort. His profession was shorting in the overseas-listed Chinese firms. The most well known event in China was 4 times of fruitless attacks on Qihoo started in last year.
Since the global financial crisis in 2008, the shorting companies have found many opportunities, to form a single but mature chain, with the purpose to seek excessive profits. The shorting companies, represented by Muddy Waters, because of their manipulation of the stock price, and malignant disruption on the market, have long been considered to have deviated from the value of anti-regulatory, and invested by the government institutes of the US, Canada etc. which are considering systemic solutions.
The investors in the U.S. market have experienced a number of short storms and could have more rational treatment on this type of behavior. In the month Citron attached Qihoo, Qihoo's stock rise was up to 12%. And, when Andrew Lefort mentioned that dangdang financial report was not credible, the stock jumped by 19.78％ in contrarian.
The monthly performance report released on June 11 said that the sales of Evergrande Group in May exceeded 10 billion for the first time. Under the expectation of market rebound, Evergrande will have the best performance outbreak in the coming months this year.
In the last year's performance report, the total assets of Evergrande were 179 billion Yuan, mobile fund was up to 65.1 billion Yuan. According to the details revealed in the monthly report, the balance sheet was unprecedented and Evergrande received a higher level of accreditation and assessment by domestic and foreign banks and investment institutions.
By the impact of the good news, Evergrande's stock price will have a significant rise in the near future. In the weekend before Evergrande released the performance report in May, the closing price from the last trading day was up to 4.03 to 4.32, and rose to 4.55 Yuan in Monday, increased by 13%. Citigroup, Goldman, Deutsche Bank and other investment banks thought that Evergrande's stock price is expected up to about 6-8 Yuan.
According to professional analyst, these backgrounds, perhaps constitute the reason Citron attacks Evergrande.
For Chinese mainland stock market, Citron and other agencies are unable to interfere. The attacks on the U.S. market listed Chinese firms suffered repeated rebuffs. Selecting Hong Kong stock as the target, with its skilled operational practices, is expecting an impact that once again, is the real purpose of Citron. A very simple reason to select Evergrande is that Evergrande is a Chinese Hong Kong real estate firm and also the representative of large national enterprises, and their recent performance was very good, doing backhand short at this point will have the space second to none.
Another un-ignored reason is that Europe's debt crisis is deepening still. To transfer the pressure, we do not rule out that under the auspices of some hard-to-self-protection interest groups, the shorting institutions deliberately create a conspiracy theory, to stick together to attack other markets with better performance. Evergrande was the first to be attacked.
Since this report published, Evergrande quickly made a public response to clarify that the report is untrue. The Chairman of Evergrande, Mr. Xu Jiayin, said that he will clarify them one by one. The contents of this report, even some very serious criminal charges, mean clearly that the Evergrande does not plan to give up. The biggest challengers in this event must be market and investors.
In fact, Evergrande did not expect such sudden attacks. The stock price of Evergrande at that date fell to 3.60 Yuan, the biggest decline in record. Then, Evergrande responded quickly to regain lost ground. The stock price was since soaring. The closing price on that date was 3.97 Yuan, rising about 10 percent.
SOURCE Sina Leju