Full­share hits back at re­port

Port Douglas & Mossman Gazette - - BUSINESS - Shane Ni­chols

THE Chi­nese owner of the Sher­a­ton Mi­rage in Port Dou­glas has stren­u­ously de­nied al­le­ga­tions of stock ma­nip­u­la­tion.

Trad­ing in shares of the Hong Kong-listed Full­share Hold­ings, which bought the Sher­a­ton Mi­rage in 2011, was sus­pended on April 25 af­ter the re­lease of a re­port by Cal­i­for­nian com­pany Glau­cus Re­search, a known short-seller of tar­get stocks.

Glau­cus al­leges Full­share Group is “one of the largest stock ma­nip­u­la­tion schemes trad­ing on any ex­change any­where in the world”. The com­pany’s share price plum­meted when the re­port was re­leased. Trad­ing was sus­pended pend­ing a “clar­i­fi­ca­tion an­nounce­ment” by Full­share.

The al­le­ga­tions of share price ma­nip­u­la­tion are based on “un­usual” trad­ing pat­terns.

Glau­cus said its re­search found that if in­vestors bought and held onto Full­share shares be­tween Novem­ber 14 last year and last week, they would have in­curred a loss of 34 per cent.

But if they had bought dur­ing the last hour of trade everyday, taken a profit and done the same thing ev­ery day un­til April 21, they would have made 76 per cent.

Analysis of Zall had re­vealed a sim­i­lar in­ex­pli­ca­ble trad­ing pat­tern.

Com­pany chair­man Ji Changqun is­sued a de­tailed re­but­tal of the al­le­ga­tions about in­flated val­u­a­tions, as­set dis­posal and share price ma­nip­u­la­tion in a state­ment on Tues­day (May 2).

Mr Ji said al­le­ga­tions by Glau­cus were mis­lead­ing, bi­ased, se­lec­tive, in­ac­cu­rate ground­less, and ir­re­spon­si­ble spec­u­la­tion. He said Glau­cus seemed un­fa­mil­iar with Chi­nese cor­po­rate law and gov­er­nance.

Re­gard­ing the share trad­ing pat­tern, Mr Ji said Glau­cus had been se­lec­tive in the time­frame it quoted and that Full­share had is­sued a great many shares in the same pe­riod.

Media spec­u­la­tion about Full­share picked up in Septem­ber when the Wall St Jour­nal com­mented (“Full­share an­other $13bn HK stock­mar­ket mys­tery”) on its deal with China High Speed Trans­mis­sion, China’s big­gest maker of gear­boxes for wind tur­bines.

At the time, Full­share had about 760 em­ploy­ees and was tiny com­pared with CHST. Af­ter the deal, in­volv­ing share is­sues and no cash, it sud­denly had more than 9000 work­ers.

Un­til then, Full­share, rapidly grow­ing as a con­glom­er­ate on the Chi­nese main­land, had been below an­a­lysts’ at­ten­tion. In­deed its media-shy chair­man was hardly known out­side of Nan­jing.

The WSJ noted Full­share Hold­ings had grown “from a val­u­a­tion of around $US40m to $US10bn, which made it big­ger than Goodyear and Gap, com­pa­nies with many times its as­sets and sales”.

In Novem­ber 2016 the South China Morn­ing Post re­ported on the com­ple­tion of the CHST deal (“Low pro­file busi­ness­man be­hind gutsy Full­share deal to swal­low wind tur­bine gear­box leader”).

It noted Full­share had a cap­i­tal­i­sa­tion of about nine times its net as­sets. A recognised blue chip de­vel­oper, China Overseas Land and In­vest­ment for ex­am­ple, was sit­ting on a mul­ti­ple of just 1.15.

An­other deal that aroused in­ter­est had been link­age with the Zall group, which builds shop­ping malls, whose share price tripled since Full­share bought the stake from Mr Ji in Oc­to­ber 2015.

The soar­ing val­u­a­tions even­tu­ally drew the at­ten­tion of short-sell­ing spe­cial­ists, Glau­cus.

Glau­cus did re­search on Full­share, pre­sum­ably with the aim of un­cov­er­ing in­for­ma­tion that would al­low it to take a short sell­ing po­si­tion in its tar­get and then re­lease a damn­ing re­port so Glau­cus would profit when the share price fell.

Its re­port on An­zac Day did just that.

Glau­cus said the com­pany gen­er­ated “a pal­try” 132 mil­lion yuan ($19 mil­lion) of earn­ings be­fore in­ter­est and tax, mean­ing its stock – which has soared 851 per­cent in the past three years – had “a lu­di­crous val­u­a­tion” of about 431 times re­cur­ring op­er­at­ing profit.

The web of cross own­er­ship and loans be­tween Full­share, other com­pa­nies and banks ini­tially led to fears about one or more of these en­ti­ties be­ing se­ri­ously dam­aged in the long run – with im­pli­ca­tions, though quite re­mote, lo­cally for the Sher­a­ton Mi­rage op­er­a­tion in Aus­tralia. Among the hard­est hit was China Huarong As­set Man­age­ment Co, China’s big­gest bad-loan man­ager.

Share prices in some of these, how­ever, have started to re­cover since the Glau­cus re­port hit.

Full­share Hold­ings’ an­nual gen­eral meet­ing is in Nan­jing on May 19.

Pic­ture: SHANE NI­CHOLS

Full­share chair­man Ji Changqun at the 2016 re­launch of the Sher­a­ton Mi­rage

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