Detailed rebuttal from China Minzhong

PHOTO: Detailed rebuttal from China Minzhong

CHINA - China Minzhong Food Corporation gave a detailed rebuttal to short-seller Glaucus Research Group's allegations of fraudulent disclosures on Sunday, saying they were "mischievous and calculated to cause panic and impose maximum damage on the price of the company's securities for their own benefit".

It was the third response by the China vegetable seller since damaging allegations from Glaucus last Monday sent its share price down as much as 51 per cent.

United States-based Glaucus had claimed that China Minzhong fabricated sales and other figures for the years leading up to its 2010 listing, doctored its capital expenditures and boasted growth that was too good to be true.

The two responses from China Minzhong last week denied the Glaucus allegations, but were lacking in specifics. In the firm's latest salvo on Sunday evening, every allegation was highlighted and rebutted in a 19-page response.

China Minzhong also provided documents to support its position.

It even included over 20 photographs of its new Putian industrial park, to rebut allegations that its capital expenditure figures were inflated in order to mask fake sales on its balance sheet.

The company claimed Glaucus had "mischievously" presented only part of the balance sheets for the years 2010 to 2012 in its attempt to prove that capital expenditure figures were inflated.

Glaucus had also not considered differences in financial reporting under Chinese and Singaporean accounting standards, it said.

Regarding the allegation that it had faked sales figures to its two largest customers before its listing, China Minzhong provided sales contracts, tax invoices, customs documents and written confirmation from the two customers' legal representatives that the sales indeed took place.

Glaucus had also claimed that China Minzhong's largest supplier for the pre-listing track record period had its business licence revoked in February 2010 and cast doubts on China Minzhong's purchases from it.

China Minzhong said it was not aware its supplier's business licence had been revoked and continued trading with it until October 2010 when mushroom spore quality failed to meet requirements.

"We have the relevant purchase related documents to show our purchases from Chengdu Shufeng (the supplier) for the period in question. During that period, we had also started obtaining mushroom spores from other suppliers, one of whom remains our top supplier today."

China Minzhong also rebutted the claim that its growth was too good to be true, saying its performance "can be substantiated".

It accused Glaucus of going beyond fair comment.

Trading in China Minzhong shares will resume on Monday.

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