Fraud rumours send Mindray Medical rocketing
17 January 2014 Beijing
Image: Shutterstock
Whisperings of fraud are continuing to distress Mindray Medical, with a high amount of the Chinese firm鈥檚 stock having been borrowed since October.
DataLend鈥檚 most recent statistics show that Mindray Medical has a current utilisation of 88.14 percent. The stock, which has 25.3 million shares on loan, spent most of last year in the GC territory, but fees to borrow shot up in late November.
China's largest medical equipment manufacturer manufactures and markets medical devices for both human and veterinary use, but has had to vigorously defend its firm in the light of fraud accusations.
Ottoman Bay Research issued a report in December 2013 that made some damming charges against the firm, even including pictures that compared the firm鈥檚 own photos of an illustrious looking research and development centre that stood in stark contrast to Ottoman鈥檚 picture of a gated field.
The research company went on to claim that the Chinese firm masterminded 鈥渁ccounting shenanigans鈥�: moving cash through a complex maze of offshore subsidiaries to inflate sales, significantly overstating the earnings power latent in the business, and inflating revenues by 30 percent.
It added that despite what appears to be a rich balance sheet ($1 billion as of 30 September 2013), that Mindray was a serial capital raiser and borrows from capital markets any time the company needs to pay out cash.
鈥淎 company reporting over $1 billion dollars in cash should not have to rely on debt or equity financing to fund its recurring annual dividend or a $101 million acquisition,鈥� said the report.
It noted that the US 麻豆传媒 and Exchange Commission had six correspondences with the firm since 2012, and that it had submitted its documents to the SEC for further review.
But a mere day later, after the stock tumbled 11 percent, Mindray hit back. In a public statement, the firm said that its financial statements had been audited by independent accountants, PricewaterhouseCoopers (PwC), who has also been acting as Mindray's auditor since 2008.
It added that the research report took information provided to the SEC out of context in an effort to discredit the company's financial numbers, and that photos 鈥減urportedly taken at Mindray's Nanjing and Zhongguancuan facilities鈥re of our completed Changping, Beijing facility (not our Zhonguancuan facility).鈥�
The statement helped the stock bounce back somewhat, and it closed up 4.2 percent on 13 December, with the Bank of America setting a $40 price target and raising its recommendation from neutral to buy.
Since then, utilisation has stayed high amount of the Chinese firm鈥檚 stock having been borrowed since October.
DataLend鈥檚 current statistics on the stock see it with 28.7 million shares in inventory, short interest of 27.94 percent, and 29.32 days to cover.
"Fees to borrow Mindray Medical peaked in late November, rising 25 times above the rates from a month before,鈥� said Chris Benedict, vice president of DataLend.
鈥淔ees dipped at the start of December as the stock price showed some improvement, but they have been rising again over the past month as the stock price fluctuates.鈥� However, Benedict added that fees today are at just half the levels seen at the November peak.
鈥淯tilisation steadily rose for the six months to November but has been on a slight, gradual decline since then. Mindray consistently has been among the most searched-for securities on DataLend in the past few months, meaning traders are closely watching this stock."
DataLend鈥檚 most recent statistics show that Mindray Medical has a current utilisation of 88.14 percent. The stock, which has 25.3 million shares on loan, spent most of last year in the GC territory, but fees to borrow shot up in late November.
China's largest medical equipment manufacturer manufactures and markets medical devices for both human and veterinary use, but has had to vigorously defend its firm in the light of fraud accusations.
Ottoman Bay Research issued a report in December 2013 that made some damming charges against the firm, even including pictures that compared the firm鈥檚 own photos of an illustrious looking research and development centre that stood in stark contrast to Ottoman鈥檚 picture of a gated field.
The research company went on to claim that the Chinese firm masterminded 鈥渁ccounting shenanigans鈥�: moving cash through a complex maze of offshore subsidiaries to inflate sales, significantly overstating the earnings power latent in the business, and inflating revenues by 30 percent.
It added that despite what appears to be a rich balance sheet ($1 billion as of 30 September 2013), that Mindray was a serial capital raiser and borrows from capital markets any time the company needs to pay out cash.
鈥淎 company reporting over $1 billion dollars in cash should not have to rely on debt or equity financing to fund its recurring annual dividend or a $101 million acquisition,鈥� said the report.
It noted that the US 麻豆传媒 and Exchange Commission had six correspondences with the firm since 2012, and that it had submitted its documents to the SEC for further review.
But a mere day later, after the stock tumbled 11 percent, Mindray hit back. In a public statement, the firm said that its financial statements had been audited by independent accountants, PricewaterhouseCoopers (PwC), who has also been acting as Mindray's auditor since 2008.
It added that the research report took information provided to the SEC out of context in an effort to discredit the company's financial numbers, and that photos 鈥減urportedly taken at Mindray's Nanjing and Zhongguancuan facilities鈥re of our completed Changping, Beijing facility (not our Zhonguancuan facility).鈥�
The statement helped the stock bounce back somewhat, and it closed up 4.2 percent on 13 December, with the Bank of America setting a $40 price target and raising its recommendation from neutral to buy.
Since then, utilisation has stayed high amount of the Chinese firm鈥檚 stock having been borrowed since October.
DataLend鈥檚 current statistics on the stock see it with 28.7 million shares in inventory, short interest of 27.94 percent, and 29.32 days to cover.
"Fees to borrow Mindray Medical peaked in late November, rising 25 times above the rates from a month before,鈥� said Chris Benedict, vice president of DataLend.
鈥淔ees dipped at the start of December as the stock price showed some improvement, but they have been rising again over the past month as the stock price fluctuates.鈥� However, Benedict added that fees today are at just half the levels seen at the November peak.
鈥淯tilisation steadily rose for the six months to November but has been on a slight, gradual decline since then. Mindray consistently has been among the most searched-for securities on DataLend in the past few months, meaning traders are closely watching this stock."
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