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Hong Kong’s SFC seeks to claw back US$454 million from Tianhe Chemicals IPO for investors after accounting scandal
- Tianhe Chemicals overstated its revenue by 6.7 billion yuan (US$981 million) for three years leading to its stock listing in June 2014
- Market regulator hauls Chinese lubricant additives maker and ex-CEO Wei Xuan to tribunal for issuing prospectus with misleading information
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Hong Kong’s financial market regulator is taking legal action against China’s largest lubricant additives producer to recover HK$3.52 billion (US$454 million) of proceeds from its 2014 initial public offering (IPO) following an accounting scandal.
The Securities and Futures Commission said it has started proceedings in the Market Misconduct Tribunal against Tianhe Chemicals Group and its executive director Wei Xuan for issuing its IPO prospectus that contained inflated sales.
Tianhe overstated its revenue by 6.7 billion yuan (US$981 million) from 2011 to 2013, or 53 per cent of its reported sales for those years, the SFC alleged in its statement late Monday. The move was likely to induce investors to subscribe for its stock offering, or boost its stock price, it added.
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The action represents the market watchdog’s reminder to the industry amid a booming IPO market that has sent investors into a frenzy after a recent record-breaking subscription trend. More than 30 companies have been taken to the tribunal since its formation in 2003 for fake accounting, insider trading and price rigging, among others.
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If successful, the sum would represent the biggest clawback in Hong Kong’s market, surpassing the HK$1.42 billion order against Qunxing Paper Holdings in 2018, and the HK$1 billion order against textile maker Hontex International in 2012. Both involved misleading IPO information.
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