LDK audit committee chief resigns, shares slide
LOS ANGELES (Reuters) - China-based solar equipment maker LDK Solar Co Ltd said on Monday the chairman of its audit committee had resigned, and its shares fell to their lowest level in a year.
The departure of Louis Tung-jung Hsieh came after LDK was named in recent reports on weak corporate governance practices at Chinese companies by ratings agencies Fitch and Moody's Investors Service.
The company did not give a reason for Hsieh's resignation.
"This could be just a scenario where someone is leaving for a better opportunity," Kaufman Bros. analyst Jeff Bencik said. "Most investors are not going to take it that way, but we just don't know."
Hsieh will be replaced by Maurice Wai-fung Ngai, who was appointed to the board of directors for a term that will run until the annual meeting of the company's shareholders later this year, when he will be eligible to be elected to a three-year term.
Numerous allegations of fraud and accounting irregularities against Chinese companies have emerged recently, with a number of management changes at Chinese solar companies putting the sector in the spotlight.
In the last week alone, the audit committee chairman of Trina Solar Ltd and the chief financial officer of JA Solar Holdings Co Ltd each resigned.
In its report, released earlier on Monday, Fitch said LDK showed several weakness indicators, including concentrated ownership and volatile profit margins.
In 2007, LDK launched an internal investigation following accusations by a former financial controller that there were inconsistencies in the company's inventory reporting. The probe found no material discrepancies. The U.S. Securities and Exchange Commission questioned LDK about the issue but did not recommend any action against the company.
Shares of LDK were down 4 percent at $6.26 on the New York Stock Exchange. They fell to $6.05 earlier in the session, their lowest since July 20, 2010.
Bencik noted, however, that LDK's decline was in line with that of other solar stocks on Monday.
"The stock has already been hit so hard," Bencik said, referring to the 38 percent drop in the company's share price this year.
The stock trades at slightly more than three times projected 2011 earnings, compared with a median multiple of just over 13 in the solar industry.
"It's a risk-reward game, and obviously this is one of the risks, and that's why investors aren't paying as much for it," Bencik said.
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