Updated from 10:59 a.m. with 21Vianet statement and stock price information.
Trinity Research published a 121-page report Wednesday in which it claimed the Chinese Internet data center services provider has committed fraud via fabricated SEC financial statements and illegal activities conducted in China. Trinity presented evidence including Chinese regulatory and State Administration for Industry and Commerce filings, photos of so-called "ghost offices" and "ghost acquisitions," original Chinese legal documents, and findings from in-person visits to all 72 of 21Vianet's data centers.
Trinity proposed that the fraud, coupled with 21Vianet's RMB3 billion in debt, would bring the stock down to zero and would cause the stock to be de-listed in the near future.
21Vianet issued the following statement early Wednesday afternoon in response to the allegations:
"21Vianet believes that the allegations made contain numerous errors, unsupported speculation and malicious interpretations of events. 21Vianet is committed to providing more detailed response to the allegations promptly and to rebutting false claims that attempt to undermine confidence in its business, financial condition and results of operations.
21Vianet remains focused on its business vision and strategy to become a leading Internet infrastructure service provider in China. 21Vianet intends to take all appropriate legal actions to defend itself against these malicious allegations and to protect the interest of its shareholders."
The stock was up shortly after the market opened after Stifel Nicolaus (SF) initiated coverage on the stock with a "buy" rating and a $33 price target. More than 21.7 million shares had changed hands as of 12:31 p.m., compared to the average volume of 1,039,080.
Separately, TheStreet Ratings team rates 21VIANET GROUP INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate 21VIANET GROUP INC (VNET) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk."
You can view the full analysis from the report here: VNET Ratings Report
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