Short Seller Glaucus Alleges Irregularities in Singapore-Listed China Minzhong; fresh and processed vegetables producer “fabricated” its sales figures to its top two customers; Shareholders include GIC, Templeton, Salim’s Indofood, CMIA

Aug 25, 2013

Short Seller Glaucus Alleges Irregularities in China Minzhong

By Gaurav Raghuvanshi

China Minzhong Food Corp.K2N.SG -47.78% Monday halted trading in its shares in Singapore as the food supplier’s stock fell sharply after a short seller published a report alleging irregularities in the company’s business. The company’s share price nearly halved to S$0.53 before the company requested a halt pending the release of an announcement. It didn’t give details. Glaucus Research Group, a firm with a short position on China Minzhong, said in a report that the fresh and processed vegetables producer “fabricated” its sales figures to its top two customers. The research firm cited registry records to claim that China Minzhong’s biggest customer, a Taiwan-based food distributor, was incorporated in November 2009. That was after China Minzhong’s track record period of 2007-2009 mentioned in its initial public offering prospectus, it said. It also said that according to filings by China’s State Administration for Industry and Commerce, China Minzhong’s second-biggest customer had zero revenue in 2009. The research firm didn’t name the two customers. Glaucus Research recommended a ‘strong sell’ on China Minzhong with a price target of S$0.00 for the company’s shares. Glaucus Research, based in California, said it was short China Minzhong, which means that it stands to gain from the decline in the company’s share price.August 26, 2013, 4:19 a.m. ET

Shares of China Minzhong Dive as Short Seller Attacks

California Research Firm Accuses Vegetable Supplier of Fabricating Sales Figures


SINGAPORE—China Minzhong Food Corp. K2N.SG -47.78% became the latest Singapore-traded target of short sellers, as a California research firm’s accusations of irregularities pummeled its shares and led to a trading halt.

The share price fell by nearly half, to 53 Singapore cents (41 U.S. cents), before the supplier of fresh and processed vegetables requested a halt pending an announcement. China Minzhong didn’t give details and Dave Tan, the company’s public- and investor-relations manager, didn’t answer calls to his landline or mobile number.

The price drop followed a report from Glaucus Research Group that China Minzhong “fabricated” sales figures to its top two customers. Glaucus has a short position on the company’s shares, which means it stands to gain from a price decline. It issued “strong sell” recommendation, with a price target of zero for the company’s shares.

Last year Singapore-listed Olam International Ltd. was targeted by short seller Carson Block of Muddy Waters LLC, who accused the supplier of agricultural commodities of improper accounting and said its expansion plan was overly aggressive. Olam denied any wrongdoing and was backed by its biggest investor, Singapore’s state investor Temasek Holdings Pte., which raised its stake to nearly 24% from 16%.

Olam traded at S$1.51 in the afternoon on Monday, still down 13% from the price last Nov. 19, when Mr. Block first attacked the company and predicted its failure.

Glaucus Research’s website declares it was founded “to help investors navigate treacherous financial waters in search of great investment opportunities.” It cites the Greek sea god Glaucus, a legendary rescuer of sailors and fishermen also possessed of the power of prophecy; “glaucus” is also the name of a tiny sea slug with a painful sting.

According to Glaucus, China Minzhong said in the prospectus for its initial public offering that its biggest customer for the period June 2006 to September 2009 was Taiwan-based food distributor Hong Kong Yifenli—though registry records, Glaucus said, show Hong Kong Yifenli was incorporated in November 2009. Glaucus also claimed that filings by China’s State Administration for Industry and Commerce show China Minzhong’s second-biggest customer had zero revenue in 2009. The customer, Putian Daziran Vegetables Produce Co., also had zero “cost of goods sold,” indicating it hadn’t purchased goods from China Minzhong or anyone else that year, Glaucus said in its 49-page report.

The Singapore Exchange asked China Minzhong to inform investors immediately if it was aware of any reasons for the stock’s fall and directed it to confirm that it complies with all listing rules.

China Minzhong Falls by Most on Record After Short Seller Report

China Minzhong Food Corp. (MINZ) slumped by the most on record after short-seller Glaucus Research Group accused the vegetable producer of “significantly deceiving” regulators and investors about the scale of its business.

Minzhong shares were halted in Singapore at 53 Singapore cents, down 48 percent, after tumbling as much as 51 percent, the most since the company’s listing in April 2010. Short interest in Minzhong, which has become the latest target of Glaucus, rose to a record 7.2 percent of the outstanding stock on Aug. 19 from this year’s low of 3.8 percent in March, according to the most recent data from research company Markit Group Ltd.

“Publicly available filings indicate that Minzhong fabricated sales figures to its top two customers,” according to the report from Glaucus today. “Corporate registry records show that a Taiwan-based food distributor, which was supposedly Minzhong’s largest customer in the pre-IPO track record period between 2007 and 2009, was only incorporated in November 2009, suggesting, in our view, that Minzhong simply fabricated the sales figures in its prospectus.”

“The company is consulting its legal team and will comment on the report as soon as possible,” Travis Seet, a Minzhong spokesman at the company’s Putian headquarters in China’s Fujian province, said by telephone.

China Metal Recycling Holdings Ltd. (773) and China Medical Technologies Inc. have each separately been the focus of reports by Glaucus, which claims to “help investors navigate treacherous financial waters in search of great investment opportunities,” according to a statement on the home page of its website. Liquidators were appointed to China Metal in July and China Medical filed for Chapter 15 foreign-firm bankruptcy protection in New York last year.

Six of the seven analysts covering Minzhong recommend investors buy the stock, while one rates the stock a hold, Bloomberg data show.

To contact the reporter on this story: Jonathan Burgos in Singapore at

Short-seller hits China food firm in rare Singapore attack

Says China Minzhong misled investors about sales

Reuters, Published: 16:10 August 26, 2013

Singapore: Food producer China Minzhong Food Corp Ltd on Monday became the first Singapore-listed Chinese firm to come under attack by a short-seller, which wiped off more than 50 per cent of its market value in two hours and triggered a trading halt.

Short-sellers have in recent years targeted Chinese companies listed in Hong Kong, Canada and the United States, citing irregularities, but they have so far avoided any of the 143 China-based firms listed on the Singapore Exchange Ltd .

China Minzhong, which until Monday’s share price slump had a market value of around $520 million, was hit after California-based Glaucus Research Group issued a report alleging the company misled investors about sales to its biggest customers.

The report also raised questions over the credibility of China Minzhong’s financial performance compared to its peers. Glaucus said they and their associates have a direct or indirect short position in the company.

Travis Seet, China Minzhong’s financial controller, told Reuters the company was taking legal advice on how to respond to the report. He declined to make any further comment and trading was halted pending an announcement from the company.

China Minzhong listed in Singapore in 2010 and has attracted several big-name investors, including Singapore sovereign wealth fund GIC which sold its 14.4 percent stake in February to Indofood Sukses Makmur Tbk PT. Indofood had no immediate response to the queries on China Minzhong.

Other large investors include Franklin Templeton Investments Corp, which holds just under 11 percent of the food producer, according to Thomson Reuters data.

BIG BLOW Analysts said China Minzhong will struggle to recover from its share price plunge regardless of the veracity of the short-seller’s allegations.

“Given the huge damage done already, we believe it will be an up-hill task (especially without GIC’s backing now) for the company to re-build confidence,” Lim & Tan Securities wrote in a note.

Shares in China Minzhong fell 47.8 per cent in two hours of trade before the company requested a trading halt. Nearly 24 million shares were traded, almost ten times the average full day volume traded over the past month.

Four analysts have a ‘buy’ or ‘strong buy’ on the stock, Thomson Reuters data shows. China Minzhong is due to release full-year results on August 29.

A number of Chinese companies listed in Singapore ran into accounting problems in 2008 and 2010, denting investor confidence in the stocks, known as S-chips.

The Singapore Exchange has since then taken steps to improve corporate governance of listed companies and after the trading halt, the regulator said it had asked China Minzhong to confirm the company was in compliance with the rules.

China Minzhong is not the only China-based stock targeted by Glaucus this year.

The group, whose research is overseen by former lawyer Soren Aandahl, accused Hong Kong-listed China Metal Recycling Group of fraud in January this year. Hong Kong’s securities regulators has since applied to the courts to have China Metal Recycling liquidated.

Last year, high-profile short seller Muddy Waters attacked Singapore commodity trading firm Olam, prompting the company to raise cash as its stock and bond prices tumbled.

Singapore state investor Temasek, stepped in to prop the company, raising its stake to 24 per cent from 16 per cent.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

One Response to Short Seller Glaucus Alleges Irregularities in Singapore-Listed China Minzhong; fresh and processed vegetables producer “fabricated” its sales figures to its top two customers; Shareholders include GIC, Templeton, Salim’s Indofood, CMIA

  1. Its like you read my mind!

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