Shares in Huabao International Holdings plunged by almost a fifth yesterday. Investors dumped the stock even after the company defended itself from an anonymous online research report accusing it of inflating profits and alleging that the firm's chairwoman, Chu Lam Yiu, had illegitimately 'recycled' proceeds of share sales back into the company to sustain high dividend payouts.
Huaboa's shares fell as much as 18 per cent when they resumed trading after being suspended for six trading days because of the anonymous report. Huabao recovered some lost ground to close 7 per cent lower at HK$3.70 yesterday.
Chu, nicknamed the 'queen of cash-outs' by the Hurun Research Institute, which put her second on a list of mainland entrepreneurs who became rich by cashing out of their firms, is accused by Anonymous Analytics of a 'pump-and-dump' scheme to enrich herself at the expense of minority shareholders.
Anonymous Analytics is a blog that claims to be a corporate-level offshoot of Anonymous, a loosely connected group of computer hackers who say their work exposes shenanigans and promotes political transparency.
According to Anonymous Analytics, Chu has sold down her stake in Huabao from 74.9 per cent in early 2007 to 37.7 per cent early last year in five disposals at increasingly high share prices, raising some HK$9.4 billion in the process. Huabao makes tobacco flavouring fragrances.
In a report late last month, Anonymous Analytics said it had scrutinised 23 sets of documents covering the company's subsidiaries lodged with various units of the State Administration for Industry and Commerce (SAIC). Based on its analysis of the filings, Anonymous Analytics said most of Huabao's subsidiaries made gross profit margins of 40 to 50 per cent, in line with industry standards but short of the 74 per cent reported by the firm in 2010.