Muddy Waters targeted Man Wah says it has cash for more share buybacks

PUBLISHED : Wednesday, 14 June, 2017, 8:39pm
UPDATED : Wednesday, 14 June, 2017, 10:59pm

Furniture maker Man Wah Holdings, under attack by short-seller Muddy Waters, says it has HK$1.8 billion in cash flow on hand should it need to buy back more shares in the Hong Kong market.

The company has spent more than HK$1.2 billion buying back shares up till Wednesday afternoon since the stock resumed trading last Friday.

Trading of Man Wah shares was suspended on June 7 afternoon after Muddy Waters, one of the most prominent short sellers in the global financial markets, named the company as its next target.

Man Wah shares had already plunged by 10 per cent before it was suspended, but it rebounded sharply by 26 per cent when trading resumed one and a half days later.

They were trading 1.2 per cent lower to close at HK$6.70 on Wednesday afternoon.

Man Wah shares soar as sofa maker fights back against Muddy Waters’ short sale

In a presentation to the press last week, Muddy Waters’ founder Carson Block raised questions about the company’s alleged inconsistencies in taxes and China sales growth, and accused the company of hiding at least 48 per cent more debt than its reported HK$1.05 billion.

Chairman of Man Wah Wong Man-li has called the allegations “false and groundless” in a media briefing on Wednesday.

“Why would I borrow debts and then spend the money on dividends? This is not logical at all,” Wong said.

He said the company had earned HK$6 billion since it listed in the Hong Kong market, but $5.2 billion from the earnings had been spent on dividend payout and share buybacks.

In response to Muddy Waters’ claim that the company’s margins are higher than that of tech giant Apple’s, Wong said the short-seller did not fully understand their business model.

He said the company’s market share in the mainland provided them with the bargaining power to minimise production costs and set prices.

“Our financial situation may look too good to be true from their perspective, but this is how it is, “ Wong said.

Wong said he is waiting for Muddy Waters to publish the full report of the accusations before he responds further. He has also filed a complaint against Muddy Waters to Securities and Futures Commission, and would not rule out suing the short-seller.