HONG KONG: Hong Kong-listed power tools maker Techtronic Industries Co Ltd on Thursday (Feb 23) denied short-seller Jehoshaphat Research’s allegations of profit manipulation and fraudulent accounting practices.
In a research report published on its website on Wednesday, Jehoshaphat, which claims to “operate anonymously”, accused the company of “manipulative accounting” and inflating profit for over a decade.
Techtronic’s shares slumped 19% on Thursday, before trading in the counter was halted. The company said trading will resume on Friday. Jehoshaphat, which holds short positions on Techtronic’s securities, said the stock has a downside of 60% to 80%.
The short-seller accused Techtronic of using a broad “toolbox of accounting games” in engineering a “perfect” profit margin trendline, calling into question its accounting practices and forecasting its 2023 results to be a “disaster”.
“It is important for shareholders to be aware that the allegations are the sole opinion of a short seller … and that it may be intended specifically to undermine confidence in the company and its management,“ Techtronic responded in an exchange filing.
In an emailed response to the statement, Jehoshaphat said it did not intend to “undermine confidence in the company, nor to harm its reputation”.
Jehoshaphat also said it was against its policy to contact any current or recent insiders at companies they are investigating, after Techtronic accused the short-seller of not contacting it during its research process.
“Talking to Techtronic ahead of our report was not an option for us,” Jehoshaphat said.
Short-seller reports have been responsible for steep drops in the shares of Hong Kong-listed retailer MINISO Group Holding and EV maker NIO Inc. Most recently, a short-seller report spurred an over US$100 billion rout in shares of India’s Adani Group companies. – Reuters