China Huishan Dairy Holdings halted the trading of its shares in Hong Kong on Friday, after the country’s biggest operator of cattle farms found itself in the cross hairs of short-selling fund Muddy Waters. Huishan’s shares fell as much as 4.3 per cent to a 15-month low of HK$2.69, before trading was suspended at HK$2.75 on the Hong Kong Stock Exchange. Muddy Waters said in a Thursday report that the company is “worth close to zero,” questioning Huishan’s reported earnings over the last few years. The operator, based in northeastern China’s Shenyang, inflated the expenditure on its dairy farms by as much as 1.6 billion yuan, Muddy Waters said. Huishan is studying the Muddy Waters report and preparing a response, executive vice president Ge Kun told the South China Morning Post by phone, without elaborating. The Chinese company is no stranger to unorthodox financial plans. In April, it proposed to raise 1 billion yuan by selling 50,000 dairy cows -- about a quarter of its herd -- to Guangdong Yuexin Finance Lease Co, and then leasing the animals back. The plan failed, but it didn’t discourage Huishan from proposing a revised scheme last month, where it aimed to raise 750 million by using 40,000 of its cattle as collateral for a loan. The company has 1.38 billion yuan of debt maturing in October 2018, according to Bloomberg data. Huishan estimates that its so-called biological assets, which it pledged for five-year loans with annual interest of 6.2 per cent, are worth 1.55 billion yuan, according to its filings to the Hong Kong Stock Exchange. That’s all “excessive leverage,” Muddy Waters said, claiming that Huishan had misstated its self-sufficiency in growing alfalfa, an important feed crop for cattle. Muddy Waters also concluded that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and the short-seller found company chairman Yang Kai controls the subsidiary and farms. The California-based researcher said it had drawn the conclusion after months of research where its investigators visited 35 farms to speak with related business entities including suppliers, and flew surveillance drones over some of Huishan’s farms. Active short-sellers such as Muddy Waters made its name for betting against Chinese companies listed in Hong Kong and North America. It’s been the first time in at least a year since Muddy Waters declared a company on its short-selling list as “worth nothing.” Sino-Forest Corp, the former Toronto-listed operator of tree plantations, is probably the most famous victim of Muddy Water’s shorts. The company’s US$6 billion in market value was decimated after its accounting was questioned in 2011, and it was described as a Ponzi Scheme. Less than a year after Muddy Waters’ first report, Sino-Forest filed for bankruptcy protection in Canada, eventually leading to fraud allegations by the Ontario Securities Commission and a US$9 billion class action suit by shareholders.