NEW YORK (
) -- Two more Chinese small-cap companies saw their shares halted this week as the scandal surrounding stocks hailing from the People's Republic showed no signs of abating.
First, it was
on Wednesday. Then, on Friday,
suspended shares of
, a "leading supplier of day-old chickens raised for meat production."
Fourteen Chinese stocks listed on major U.S. exchanges are now halted. Some of the suspensions have lasted nearly three months as exchange officials sort through allegations of accounting chicanery, mostly lodged by audit firms that abruptly resign.
The odds of maintaining a listing in the wake of a halt appear increasingly poor. Of the halts since the beginning of the year, exchanges have booted nine companies' equities to the over-the-counter markets, where values are typically and predictably decimated.
The Yuhe suspension came after the company held what one analyst called an "astonishing conference call" Friday morning to address allegations made by a short- seller group a day earlier. The group, called Geoinvesting, said it had unearthed evidence that Yuhe had misled investors about an acquisition of 13 chicken farms said to have occurred in 2009.
On the conference call, company executives denied that accusation, but admitted that they had failed to disclose that the acquisition hadn't gone through. As part of the purchase agreement, Yuhe has said that it made a down payment of 80% of the purchase price, or $12 million. But when the seller decided to spike the deal, Yuhe's chairman and CEO, Zhentao Gao, decided to put the $12 million into a private bank account, the company's CFO and COO said during the conference call Friday. The executives also said that, in place of this failed deal, Yuhe had gone ahead and purchased 11 different farms from a separate seller, using that $12 million sum.
"During this entire time, Yuhe continued to claim that business was usual and that the acquisition from Dajiang did go forward," said
Rodman & Renshaw
analyst Lewis Fan in a note Friday afternoon. Fan wrote that Yuhe's failure to disclose this information was "perhaps a face-saving measure."
"We are dumbfounded by the events that have taken place," Fan continued in the note. "If true, what the company, and more specifically, the company CEO, has done, could be serious violations of securities regulations."
Rodman, which also suspended its coverage of Yuhe on Friday, is normally a China stock bull by dint of its role as underwriter of scores of Chinese securities, including a $25 million follow-on offering of Yuhe shares in October 2010.