(China Green Agriculture story updated to include further details from the J Capital research report.)
The firm, Beijing-based J Capital, said in its report that it had found "compelling evidence that China Green Agriculture ... has vastly inflated the sales and profit figures it reports to investors."
China Green closed Wednesday at $8.11, down 10.4%, on volume of more than 3 million shares, six times the daily average turnover in the name.J Capital cited financial records filed by China Green with a Chinese government bureau called the State Administration of Industry and Commerce, or SAIC. Those filings show that China Green Agriculture's main operating unit took in revenue of $8.4 million in calendar 2009, J Capital said in its report. The company reported revenue for the same period of $41.8 million to the Securities and Exchange Commission, according to the report. >>The Shanghai Numbers: A Special Series by TheStreet In September, China Green issued a press release defending the accuracy of its filings in the U.S. "It is well documented that reports filed with [the SAIC] often do not reflect the comprehensive income and financial condition of a company," China Green said in the press release. China Green executives weren't immediately available for comment Wednesday, but the company's U.S.-based spokesperson referred TheStreet to that earlier press release. The use of SAIC records to demonstrate fraud has been criticized by long-side investors in Chinese small-caps. Some defenders of the stocks say that different accounting methods are used in China, and that results in the sometimes enormous discrepancies. Others on the long side say that filing accurate records with the SAIC is simply not taken seriously in China. In its own report, J Capital addressed that contention. "Few companies simply lie on their SAIC filings," the report said. "The government audits company books annually and would rescind the license if such a large discrepancy were found." J Capital contends that its own research into China Green's business "supports the $8 million figure as roughly accurate." Based on this, the report asserts, shares of the company are worth "no more than $2.85 a share."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV