NEW YORK - Sino-Forest the Chinese based company fought back today against allegations from Muddy Waters a firm likely a quarter of the size of The Markets Are Open. However this report has caused a lot of stir in the investment community.
Sino-Forest said that Muddy Waters LLC did not contact them before writing the report. The company said Muddy Waters is short and should not have credibility and it is registered with the SEC.
The company said that "Muddy Waters fundamentally misunderstands and misrepresents the most basic items in our published Management’s Discussion & Analysis with respect to revenue generated from Yunnan Province, which we report as being approximately 45.5% of the Company’s standing timber revenue of approximately US$508 million. Muddy Waters alleges that it is impossible that such revenue existed because achieving such levels would greatly exceed allowable cutting quotas and it would be impossible to truck close to that volume in the period. However, that revenue was very clearly disclosed in our MD&A filed for Q1 and Q2 of 2010 as revenue resulting from the sale of the standing timber - there is no cutting or transport involved, as the trees were sold but not harvested and therefore are not considered part of the quota for the region until the harvesting is conducted by the buyers."
The company fired back
"Muddy Waters alleges that the Company overstated the assets in Yunnan Province, based on its erroneous and narrow assumption that our only purchases in Yunnan Province consisted of purchases of 20,574 ha of plantations in Gengma. However, this allegation ignores the fact that in addition to the purchased plantations in Gengma county, we have purchased approximately 173,000 ha of plantations in approximately 25 other counties in Yunnan Province as of December 31, 2010.”
It will be interesting to see where this story treads.
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