* Anonymous Analytics says has not made money from Tianhe
* Says published report for public good
* Tianhe says Anonymous report has errors, misleading
By Pete Sweeney
SHANGHAI, Sept 2 Secretive stock research firm
Anonymous Analytics, which has publicly accused China's Tianhe
Chemicals of falsifying financial statements, said it
published the report for the public good, not money.
"We do not profit in any way from a decline in Tianhe's
share price. We have no financial incentive linked to Tianhe's
stock performance," Anonymous wrote in an e-mail response to
Reuters, adding that it published the report because it was "the
right thing to do."
The organisation calls itself a "faction" of the Anonymous
vigilante group, which has gained prominence for attacking
government and corporate websites around the world.
The group does not identify its employees or provide any
registration information, address, or telephone number on its
website, relying solely on a secure e-mail box for
communication. "We don't really talk about AA's structure and
how we operate," it said in the e-mail.
Anonymous Analytics says it has "moved the issue of
transparency from the political level to the corporate level".
In the report on Tianhe published on Monday, it advised
investors to sell shares of the Chinese industrial group with a
target price of $0 per share.
It predicted Tianhe would be delisted and criminal charges
would be brought against the architects of its IPO.
Tianhe, which floated $654 million worth of shares in Hong
Kong in June, last had a market capitalisation of $8 billion.
Tianhe said in a statement late on Tuesday that the
Anonymous Analytics report contained errors and misleading
statements, and that it would publish a more detailed response
soon. It halted trading of its shares earlier on Tuesday after
they fell 5 percent to HK$2.31.
Tianhe shares appear to have been targeted by short sellers
as soon as the Hong Kong exchange cleared them for shorting in
mid-August, meaning that market players believed Tianhe's strong
post-listing performance could not be sustained. The shares had
gained 25 percent since listing, compared to a 5 percent rise in
the Hong Kong China Enterprises Index.
While Anonymous says it has not directly taken a position in
the shares, its report allowed that "contacts, consultants,
affiliates, and/or clients may have a short position in the
stock or debt of Tianhe and/or options of the stock."
Client relationships between short-sale investors and the
research houses often involve commissions based on profit made
from short selling.
But Anonymous also denied being involved in any such scheme,
and also said it had not sold copies of its report to
short-sellers in advance of its publication, another common
"We did not sell advanced copies of this report. We have
made NO money on this report. The only advanced copies we gave
were a 30-45 minute embargoed heads-up to some journalists."
The report said that Tianhe Chemicals, which listed with the
backing of Bank of America Merrill Lynch, Morgan Stanley
and UBS, massively overstated its revenues and
provided inaccurate information regarding its relationships with
The report said it acquired all the information from
publicly available information, but also described visits by
investigators to sites in Shanghai.
Anonymous Analytics has said in the past that it cooperates
with others in producing reports, telling the Financial Times in
2011 that it occasionally outsourced "piecemeal work".
A source at a corporate investigation firm in Shanghai said
he had produced a report for sale to a hedge fund, only to find
some of his report reproduced verbatim in a public Anonymous
Analytics report targeting a Chinese company.
Anonymous Analytics did not respond immediately to questions
about this allegation and how it works with hedge funds.
Anonymous Analytics' secretiveness is not unusual given the
heavy pressure Chinese government organs and business leaders
have applied on due diligence investigators in China.
Other foreign short-sellers have also complained of
intimidation against their investigators and that concern,
combined with depressed valuations for many Chinese stocks that
made them difficult to short, caused many to move on to other
China's state media and industry executives have accused
foreign research firms of deliberately publishing misleading
reports intended to cause hysteria among uninformed foreign
investors, slandering otherwise decent Chinese companies in the
quest for short profit.
Anonymous' track record of reporting on what it has called
over-valued stocks has been patchy. Starting in 2011, it has
published short reports on six listed companies, five of them
Chinese, but only one - on Chaoda Modern Agricultural Holdings
- had a long-term effect. Chaoda's shares have
remained suspended since 2011.
Other targets have proven more resilient. Anonymous
published reports accusing mainland internet service company
Qihoo 360 of overstating its web traffic, but investors
shook off the allegations. Anonymous reports on Joy Global
and Huabao International Holdings also failed
to do long-term damage.
"We wouldn't say the market shrugged off our report on
Huabao. Huabao was trading at depressed levels for two years
after our report," Anonymous said.
"It's only in the last few months that it's started to trade
higher. Regarding Qihoo, that was a unique project for us. It
was effectively 19 pages of us talking only about computer code.
Surprisingly, investors don't care that much about an entire
report dedicated to coding."
Analysts point out that market reactions to such reports can
often have little to do with the veracity of a given allegation,
especially when the stock in question is a company with deep
investor support, or if it occurs during a wider market rally.
(Additional reporting by Engen Tham; Editing by Kazunori Takada
and Raju Gopalakrishnan)