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UPDATE 1-Orient Paper "pleased" with probe results, shares up
November 24, 2010 / 3:18 PM / 7 years ago

UPDATE 1-Orient Paper "pleased" with probe results, shares up

* Probe following allegations by Muddy Waters in June

* Co to make public full results of probe next week

* Shares rise 12 percent

Nov 24 (Reuters) - Chinese paper company Orient Paper (ONP.A), which was accused by a Hong Kong-based brokerage of accounting impropriety, said it was “pleased” with the results of a probe by its audit committee, sending its shares up 12 percent.

The company did not disclose details, but expects to make full results of the investigation public next week.

In a damning report in June, Muddy Waters LLC initiated coverage of the company with a “strong sell” rating, and accused it of overstating revenue and margins. Orient Paper started an accounting probe soon after.

Earlier this month, Muddy Waters took on another Chinese firm, Rino International RINO.O, accusing it of fabricating customer relationships. Rino’s auditors did find accounting irregularities. [ID:nSGE6AI0GF]

Disclosures are limited among overseas firms, and accounting irregularities have surfaced at other Chinese companies as well. [ID:nTOE65R04]

The companies’ quarterly income statements and balance sheets are typically less detailed than those from U.S. companies. Cashflow statements are only issued once a year under U.S. SEC rules for companies deemed incorporated outside the country.

Shares of Orient Paper and Rino touched year-lows post the reports by Muddy Waters -- which had a short position in both stocks -- and have lost 60 percent of their value since then.

Orient Paper shares rose 12 percent to a high of $6.15 Wednesday morning. Rino stock has been halted for a week. (Reporting by Adveith Nair in Bangalore; Editing by Don Sebastian)

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