Anonymous Analytics unveiled a detailed report on Tianhe Chemicals Group Ltd (HKG:1619) several days ago. As first reported on ValueWalk, the short biased research firm called the HK based company a fraud and shares tanking and eventually suspended. Anonymous said that the company was the biggest fraud since Sino-Forest, stating ‘Tianhe came to the market as one of the biggest IPOs of 2014, and at US$8 billion we believe it will collapse as one of the biggest frauds in history.’ Now the company has responded to the allegations. Below is a press release from Tianhe Chemicals Group Ltd (HKG:1619).

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The announcement is made by Tianhe Chemicals Group Ltd (HKG:1619) pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), and is made further to the Announcements of the Company dated 2 September 2014 and 5 September 2014 with respect to the Report.

Tianhe Chemicals Group Ltd (HKG:1619) is in active communication with the Stock Exchange in relation to their inquiries on the Report. However, it has come to the attention of the Company this afternoon that its email system has been hacked into. As a result, there is an imminent risk of leakage of such communications which may result in further market rumors. In the circumstances, the Company has decided to publish this announcement.

Tianhe Chemicals’ shares halted

As the Company is still in the process of addressing the Stock Exchange’s queries, trading of the Shares remains suspended. Resumption of trading of the Shares may only take place when all relevant information has been provided to the Stock Exchange and properly disclosed.

Tianhe Chemicals Group Ltd (HKG:1619) unequivocally denies and vigorously refutes the groundless allegations in the Report.

The Report includes a combination of falsified information, forged signature of Tianhe Chemicals Group Ltd (HKG:1619)’s chairman and blatantly untrue statements, which the Company believes have been used to undermine the Company’s reputation and to manipulate the price of the Shares. The industry analysis set forth in the Report also clearly demonstrates a lack of understanding of the specialty fluorochemicals industry, which has contributed to wildly inaccurate conclusions.

The authors of the Report have concealed themselves behind a shroud of anonymity with no information on their identity or background, or their purported expert sources. As stated in the Report, the authors are neither regulated nor licensed in any jurisdiction. As also stated in the Report, the entity’s affiliates and/or clients may have a short position in the Shares and would benefit if the price of the Shares decreases.

Tianhe Chemicals along with shareholders and Directors to take action against authors of the report

Tianhe Chemicals Group Ltd (HKG:1619), its controlling shareholders and the Directors will take all appropriate actions against the authors of the Report and anyone responsible for disseminating misleading and malicious statements designed to manipulate the price of the Shares for their gains. The controlling shareholders of the Company would also consider conducting on-market purchases of the Shares in the event of disorderly market trading of the Shares.

The Group is a specialty chemicals producer in China with leading market positions in lubricant additives and specialty fluorochemicals. The Group is the largest lubricant additives producer headquartered in China and one of the top players in the world supplying to a number of the leading global lubricant oil producers. In addition, the Group is also one of the few companies globally capable of producing specialty fluorochemicals, which have applications in a wide array of end markets around the world.

Set forth below is the Company’s response to the allegations made in the Report.

1. Allegations Regarding the Group’s Profitability and Two Sets of Books

The Report alleges that Tianhe Chemicals Group Ltd (HKG:1619) has overstated its profitability in the Prospectus and presented two sets of books. The Report refers to local AIC filings which included the 2011 and 2012 audited accounts for Jinzhou DPF-TH and Fuxin Hengtong. The Report alleges that these show materially different results compared with the financial information included in the Prospectus. None of these allegations are true. The Group has only ONE SET of books. The Company confirms that Jinzhou DPF-TH engaged both local and international accounting firms to audit its financial statements in 2011 and 2012. There are no material differences between these financial statements. The reasons why the Report has arrived at such erroneous conclusions are as follows:

1.1 The Company believes that the documents presented in the Report as supporting evidence have been fabricated as stated below.

  • Specifically, the financial statements exhibited on pages 9, 10 and 11 of the Report are not from the financial statements of Jinzhou DPF-TH and Fuxin Hengtong as audited by Liaoning Zhongheng.
    • The Company has compared these pages with the relevant pages of the financial statements audited by Liaoning Zhongheng. This clearly shows that they are materially different. In particular, the financial statements included in the Report claim that Jinzhou DPF-TH incurred losses in 2011 and 2012, while the financial statements audited by Liaoning Zhongheng confirm that Jinzhou DPF-TH recorded a profit in these years (see 1.2 below). Liaoning Zhongheng has also confirmed in writing to Tianhe Chemicals Group Ltd (HKG:1619) that the pages shown in the Report are not from the financial statements which they audited. (See attachment A for confirmation letter issued by Liaoning Zhongheng.)
    • Further, the signature shown on a so-called “summary financial page” (Page 12 of the Report) is not the signature of the Chairman Mr. Wei Qi. Mr. Wei Qi has never authorised or signed such a document. Accordingly, Tianhe Chemicals Group Ltd (HKG:1619) believes that the signature is a forgery. (See attachment B for a comparison of Mr. Wei Qi’s genuine signature and the one on page 12 of the Report.) This document is also not dated. Further, the Company and counsels have carried out searches at the Jinzhou and Fuxin AIC which prove that the extracts on pages 9 to 12 of the Report are not from their official records. (See attachment C for confirmation letters issued by Jinzhou and Fuxin local AICs.)

Tianhe Chemicals Financial statements

See full Tianhe Chemicals Clarification Announcement in PDF format here.