Muddy Waters LLC said in a research report that Sino-Forest Corp., a Canadian company with extensive timber holdings in China, has substantially overstated the amount of forest land it controls, as well as the amount of wood it has been harvesting.
Trading in the Mississauga, Ontario-based companys stock (TSX: TRE.TO) was halted by the Toronto Stock Exchange after the shares plunged 20 percent in less than 30 minutes.
Muddy Waters said in its 33-page report that the land purchases that Sino-Forest has reported in China did not square with government records, and appear to be overstated by as much as $900 million. The report also included photographs of apartment buildings and other nondescript structures at the addresses listed for some of Sino-Forest’s major customers and financial partners.
Unlike other Chinese businesses that trade on North American exchanges, Sino-Forest has attracted some large, savvy investors, includging Paulson & Co., which has more than $30 billion in assets under management.