Sino-Forest hit by Muddy Waters’ ‘perfect’ ‘pile of crap’

“We are going to provide you with some information on why Muddy Waters research is a pile of crap” — Richard Kelertas, Dundee Capital Markets. [Source: Financial Post]

A bold (and so far unheeded) call from Dundee Capital, given Muddy Waters’ “perfect” track record, depicted by Thomson Reuters in a chart released on Thursday.

That’s a helluva drop for everyone’s new favourite Chinese-Canadian timber company. Sino-Forest was trading at $C5.72 at pixel time, 74 per cent down on a month ago.

So, one week on from the release of Muddy Waters’ explosive report (and one week before Sino-Forest is due to report earnings) it’s still unclear whether its multiple allegations are true. But the market is definitely giving the sell side research house the benefit of the doubt. Though of course, Muddy Waters only needs to be wrong once for its impact to be diluted and its reputation ruined.

Meanwhile, as FT Tilt writes, the saga has gone global. There have been announcements by OSC and SEC of investigations into trading in its shares. The scandal has catalysed existing worries about Chinese reverse mergers and accounting practices. And at pixel time, Interactive Brokers was announcing it was blocking 160 Chinese securities “influenced by China accounting scandals”, according to Reuters.

Amidst all this spare a thought for Tanzanian Royalty Exploration Corp, which has announced it’s changing its NYSE ticker from TRE to TSX, in order to avoid mis-selling by traders confusing it with Sino-Forest.

It was just a bit too close to the proverbial fan, it seems.

Related links:
Sino-Forest: the case for the defence – FT Alphaville
Sino-Forest: the case for the prosecution – FT Alphaville
Here there be dragons – Macro Man