The allegations were on falsifying of accounts per-IPO and also fabrication of sales figures in prospectus.
Faked sales were also reported by minzhong's customer where they accounted for 142mill rmb in 2009 had zero revenue actually.
Details here.
https://glaucusresearch.com/corporate-corruption/
1. Fabricated Sales. Publicly available filings indicate that Minzhong fabricated sales figures
to its top two customers.
a. Top Customer Incorporated After The Track Record Period. Corporate registry
records show that a Taiwan-based food distributor, which was supposedly Minzhong’s
largest customer in the pre-IPO track record period (2007-2009), was only
incorporated in November 2009, suggesting, in our view, that Minzhong simply
fabricated the sales figures in its Prospectus.
b. SAIC Filings Indicate Faked Sales. SAIC files show that Minzhong’s second largest
customer, which purportedly accounted for RMB 142 million in sales in 2009, had zero
revenues and zero COGS in 2009.
c. Undisclosed Related Party. Minzhong reported in its Prospectus that its top customers
were independent third parties. But SAIC filings show that Minzhong’s second largest
customer was not only co-founded by Company Chairman Mr. Lin Guo Rong but that
Lin Guo Ping, who served as a legal representative of a Minzhong subsidiary,
simultaneously served as the supervisor of the Minzhong customer. It appears that
Minzhong failed to disclose such material connections to investors.
2. Top Supplier’s Business License Revoked pre-IPO. SAIC filings show that Minzhong’s
largest supplier during the pre-IPO track record period, which purportedly accounted for 18%
of the Company’s total purchases in 1Q2010 and was the Company’s primary source of
mushroom spores (reportedly its best selling product), was deregistered and stripped of its
business license for violating PRC law in February 2010, a mere two months before
Minzhong’s April 2010 IPO. In our opinion, the implication of this deregistration is that the
supplier was not a major operating business and that Minzhong fabricated payments to its
largest supplier.
3. Attempted Cover Up? After a wave of accounting scandals and de-listings among other SChips
in early 2011, it appears that Minzhong doctored the historical financials of certain
subsidiaries in their respective SAIC filings to make them appear consistent with Minzhong’s
Singapore-filed financials. Prior to the apparent cover up, SAIC filings suggest that
Minzhong’s assets and earnings.....
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Most of the time i see such filings as buying opportunity, however the way they are doing business and falsification of accounts can be easily tracked plus its china styled run business, it is very hard to see any light.
Even if trading halt is lifted, the dumping would be very fierce.
Steer clear of s chips. Not generalizing but haven't the number of lessons shown enough?
