Short Seller Attacks Evergrande Group in China

June 22, 2012 10:01 AM EDT
Rumors were flying yesterday that Evergrande Group, China's largest real estate company listed on the Hong Kong stock exchange, was insolvent and had been reporting false information. The talks was sparked by a report by Citron Research.

"HK:3333 is essentially an insolvent company that has consistently presented fraudulent information to the investing public," Citron's report dated 6/20 stated.

"Evergrande is not a story about the "China real estate bubble"; rather it is a tale of a company who has abused the capital markets as well as the generous lending of the Chinese Government in order to enrich one man, aggrandize his personal ego and support his pet projects," the report said.

Despite positive coverage by large banks, investors took Citron's report seriously, and the stock cratered. Shortly after, Citron took heat from Deutsche Bank and other analysts who thought Citron's allegations against Evergrande were invalid.

Evergrande responded to Citron's report saying "The company would like to clarify that the allegation in the report is untrue. Further clarification announcement will be made by the company in due course."

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