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Orient Paper has eye on Hong Kong listing

New York-listed company's chief meets HKEx officials for talks on initial public offering

PUBLISHED : Wednesday, 23 January, 2013, 12:00am
UPDATED : Wednesday, 23 January, 2013, 3:55am

Orient Paper, a mainland firm that Muddy Waters accused of fraud, has been talking to the Hong Kong stock exchange about a possible listing.

The paper maker, listed on the New York Stock Exchange, was the first company to be criticised by the US short-selling firm. Muddy Waters published several reports in 2010 alleging fraud, which Orient Paper has denied.

Chairman and chief executive Liu Zhenyong met stock exchange officials in Hong Kong for preliminary discussions on an initial public offering, Liu said. "We may be considering listing in Hong Kong within two to three years," he said yesterday. "We hope to be listed in two places."

If Orient Paper went ahead with a secondary listing, Hong Kong would be its top choice, Liu said. "Hong Kong is an international financial centre with many funds from all over the world," he said. "In the US, many retail investors have little understanding of the Chinese paper industry."

Chief financial officer Winston Yen said: "Our US market valuation is very low. US investors don't understand Chinese companies. They think China is a risk, so they don't give Chinese companies a good valuation."

Orient Paper's market capitalisation was US$45.6 million at the end of last week. Its share price had declined to US$2.47 from US$8.33 on June 28, 2010, when Muddy Waters published its first damning report on the company.

In that report, Muddy Waters said: "We are confident that Orient Paper is a fraud. Its purpose is to raise and misappropriate tens of millions of dollars."

A Muddy Waters spokesman told the South China Morning Post via e-mail: "Muddy Waters hasn't followed the company since late 2010, at which time, its historical financial statements were completely fraudulent.

"Having observed the degree of the misrepresentations in the financial statements at that time, we have no confidence in any subsequent financial statements put out by the same management. The market appears to reflect the same view."

Orient Paper ordered an independent investigation in 2010, led by US law firm Loeb & Loeb and Deloitte Touche Tohmatsu. In February 2011, the investigators told the US Securities and Exchange Commission they had found no wrongdoing in Orient Paper, Yen said. "Since that day, the SEC has not questioned us."


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