(Yicai Global) May 14 -- Chinese optical fiber and cable maker Hengtong Optic-Electric has denied it funneled funds to companies linked to its major shareholder Hengtong Group and its founder.
It also said a well-known Chinese financial analyst and ex-Yahoo global director did not author a story circulating under his byline claiming it did, and that he confirmed this, it said in a statement yesterday on its official account on tech titan Tencent Holding's popular WeChat messaging app.
The firm's shares [SHA:600487] have tanked for two straight days since early yesterday after the story appeared purporting to be written by the analyst, Xia Cao -- which is the pseudonym for Prof. Jeff Zheng, a former global senior director with US-based Yahoo -- called its financial dealings into question, online media Sina Finance reported.
Hengtong Optic-Electric's stock nosedived nearly 10 percent yesterday and over 8 percent since opening today in reaction to the article but rebounded to 3.82 percent to CNY15.61 (USD2.27) by the lunch break and closed down 3.33 percent, in a sign of the market's apparent reliance on the firm's statement.
The article claimed that Suzhou, Jiangsu province-based Hengtong Group made massive payments to its parent, which is controlled by its founder Cui Genliang, and to other companies in which Cui has an interest.
The recipient of CNY6.9 billion (USD1 billion) in payments entered into Hengtong Group's ledger is also closely linked to Shanghai-based Puluo Investment Management Partnership and Jinyuan Shun'an Fund Management, to which Hengtong Optic-Electric issued shares as part of a CNY3 billion private offering in 2016, the article said.
Hengtong Group impaired Hengtong Optic-Electric's interests via this complex web of equity relations and murky financial dealings, it also asserted.
The story also questioned the 'undercapitalized' firm's prepayment of CNY3.3 billion to Hubei-province-based Kaile Science and Technology, which it stated was also linked to Cui.
Kaile Science and Technology processed products and delivered them to Hengtong Optic-Electric and it prepaid Kaile to buy the unspecified raw materials to do so and did not embezzle the firm's funds, Hengtong Optic-Electric stated to justify the CNY3.3 billion prepayment.
Its investigation has determined the information in the article to be false, Hengtong Optic-Electric stressed in its denial, in which it also pledged to seek to hold the perpetrator to account.
Editor: Ben Armour