Monday, May 23, 2011

Another Chinese IPO Goes Bad

A press release this morning:

Longtop Financial Technologies Limited announced today that the Company's registered independent accounting firm, Deloitte Touche Tohmatsu CPA Ltd. ("DTT"), has resigned as auditor of the Company by letter dated May 22, 2011. [...] In its letter, DTT stated that it was resigning as the result of, among other things (1) the recently identified falsity of the Company's financial records in relation to cash at bank and loan balances (and possibly in sales revenue); (2) the deliberate interference by certain members of Longtop management in DTT's audit process; and (3) the unlawful detention of DTT's audit files.
Yikes. As Capital Observer writes,
An investment in any Chinese company requires a giant leap of faith if something as simple as cash in the bank cannot be verified properly.
My "China avoidance policy" is looking better and better. See my review of The Party: The Secret World of China's Communist Rulers.

There are some big and highly regarded hedge funds listed as holders of Longtop, which had a billion dollar market cap as of the last trade a week ago. I imagine that investors are going to become more skeptical of Chinese companies?

5 comments:

getyourselfconnected said...

Wow, this stuff still amazes me.

CP said...

http://www.zerohedge.com/article/latest-chinese-fraud-may-cost-maverick-capital-nearly-200-million

economic said...

Unreal.

getyourselfconnected said...

Last comment was mine, get accounts confused sometimes.

CP said...

I can't believe these guys don't figure out the China scam.