Kerrisdale Capital Management says in a new report that it has found evidence that the main operating subsidiary of ChinaCast Education Corp. — a company regarded as “the one shining beacon within a sea of scams,” according the report — is overstating revenue and profit.
Kerrisdale says the company is reporting significantly more revenue to the Securities and Exchange Commssion than it is to the Chinese government. Kerrisdale said that it also uncovered evidence indicating that ChinaCast has been diverting company assets through acquisitions. In one case, says the report — which is based on public documents from the Shanghai Stock Exchange — the company reported buying other companies for more than what the seller actually received. The difference, says Kerrisdale, was pocketed by a middleman company that acted as a conduit for the acquisition. In another case, the sale price was simply overstated.