OpinionPing An's compensation of Wanfu IPO investors a test case
Cooked books uncovered in three listings firm has sponsored but it's still getting angry investors to accept its offer after broker lobbying effort
China's stock market has long been compared to a casino, with cooking of the books not unheard of. Now, imagine you lose a fortune in the casino and someone volunteers to reimburse you your losses.
That's exactly what has happened to 13,426 investors who bought into Wanfu Biotechnology. Its IPO sponsor, Ping An Securities, offered them 300 million yuan (HK$380 million) after Wanfu admitted inflating its pre-IPO profit by 90 per cent.
It's an important case that reflects the subtle changes going on in China's financial industry. Most noteworthy is that it was not initiated by the regulator.
"People are angry. You don't know where that anger will lead to," said an insider. "Something has to be done."
Indeed. China's IPO market has become a money pit. Its GEM board is even more so. More than 220 of its 350 listings have dropped below their IPO prices following massive sales of stock by company management and various fraud reports.
All fingers are pointing at Ping An Securities. Fraud has been uncovered in three IPOs it has sponsored, with one of them being Wanfu.