Car­son Block takes on China’s top dairy farm in lat­est short

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG

Trad­ing in shares of China Huis­han Dairy Hold­ings Co was triple the three-month av­er­age on Mon­day, when it re­sumed trad­ing af­ter be­ing sus­pended on Fri­day. Prom­i­nent short seller Car­son Block tar­geted the Hong Kong-listed dairy farm operator and said he would seek out more com­pa­nies in the city.

Muddy Wa­ters Cap­i­tal LLC, founded by Block, said it had shorted Shenyang-based Huis­han and al­leged in a re­port last week that it’s “worth close to zero” and ques­tioned its prof­itabil­ity, caus­ing the stock to drop on Fri­day be­fore it was sus­pended.

Huis­han, China’s largest operator of milk farms with a mar­ket value of HK$37 bil­lion ($4.8 bil­lion), said the al­le­ga­tions in the re­port are ground­less and con­tain mis­rep­re­sen­ta­tions, ac­cord­ing to a state­ment late Fri­day.

Huis­han is the lat­est com­pany in Hong Kong to be tar­geted by short sellers, who bor­row shares and sell them in the hope of prof­it­ing by ac­quir­ing them at a lower price later. Block said in a tele­phone in­ter­view he’s con­cerned prices of stocks traded in the city can be ma­nip­u­lated be­cause of the low 25 per­cent free-float re­quire­ment, which also makes it a chal­leng­ing mar­ket to sell short.

“I’m al­ways a fan of short­ing to­tal frauds and Hong Kong has its share, so it will al­ways be a place for us,” said Block, who was speak­ing gen­er­ally about listed com­pa­nies in the city. “The trad­ing vol­umes gen­er­ally aren’t that good and I think there are a lot of stock ma­nip­u­la­tions in Hong Kong. That’s a func­tion of the vol­umes be­ing poor.”

Block pre­vi­ously tar­geted Hong Kong-listed Chi­nese main­land tim­ber com­pany Su­perb Sum­mit In­ter­na­tional Group Ltd Last De­cem­ber. The Se­cu­ri­ties and Fu­tures Com­mis­sion or­dered the Hong Kong Stock Ex­change to sus­pend all deal­ings in Su­perb Sum­mit’s shares, which had stopped trad­ing since Novem­ber 2014.

The Muddy Wa­ters re­port on the com­pany con­tained mis­lead­ing state­ments and fab­ri­cated con­tent, ac­cord­ing to a Su­perb Sum­mit state­ment to the ex­change in Jan­uary 2015.

Block said he is hop­ing his re­port on Huis­han will en­cour­age ac­tive fund man­agers to sell the stock.

Huis­han re­sponded, in a state­ment re­but­ting var­i­ous points in the re­port, that Muddy Wa­ters has made al­le­ga­tions “which are ground­less and con­tains var­i­ous mis­rep­re­sen­ta­tions, ma­li­cious and false al­le­ga­tions and ob­vi­ous fac­tual er­rors.” Muddy Wa­ters al­leges Huis­han recorded “fraud­u­lent prof­its” tied to the com­pany’s re­ports of pro­duc­tion of al­falfa, which Muddy Wa­ters said it pur­chases in large quan­ti­ties from third par­ties.

the mar­ket value of China Huis­han Dairy Hold­ings Co

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