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China Sky Fights Back With Letter to Holders

NEW YORK ( TheStreet) -- China Sky One Medical (CSKI), an embattled Chinese reverse-merger company currently under investigation by the SEC, is fighting back.

On Friday, the maker of traditional Chinese medicines released a letter written by its chairman and CEO, Yanqing Liu.

The letter, addressed to China Sky's shareholders, defended the company against a series of fraud allegations made by short-sellers based in the U.S. Uppermost among the allegations are that the company has reported inflated sales figures in its financial filings with the Securities and Exchange Commission.

China Sky One's fight with one short-seller, a retired businessman in Texas named John Bird, was documented on TheStreet in a story published last month. Bird's contretemps were also featured some weeks later in an article in Bloomberg Business Week. Since late December, China Sky's stock has fallen sharply, losing 25% of its value.

But, on Friday at least, Liu's letter appeared to give the stock a boost. China Sky's shares were gaining 5.3% to $5.55 at 12:10 p.m. on volume of about 400,000 shares. Daily turnover averages about 180,000 shares.

Though it failed to address any of the specific allegations made against the company over the last year, Liu's letter was strongly worded. The chairman asserted that "in the Company's history, our executive directors have never sold a single share of China Sky One Medical."

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"Our company's reputation continues to be tarnished by unfounded allegations of certain self-serving investors, whose viewpoints recently have been rehashed in media outlets, driving our share price down and create panic among our valued shareholders," Liu wrote.

"We regret that our faithful shareholders have suffered loss in the capital market as a result of reckless criticism and attacks. Most of the issues that recently resurfaced in the media were raised some time ago and have already been addressed by management. We have worked closely and diligently with all SEC inquiries and will continue to do so."

In the letter, which at times was oddly translated, Liu lamented the lack of due-diligence visits to the company on the part of investors. "So far, there are not many shareholders who have been visiting the Company, or met with our management team. Without conducting field research or seeing firsthand the dedication of our professionals, we consider the negative challenges have demonstrated little interest in knowing the business."

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