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AAC Technologies: Apple Supplier Slammed Again by Short-SellerBy Daniel Shane
Short-sellers are hounding Apple (AAPL) supplier AAC Technologies (2018.HK) again.
During Thursday afternoon trading hours in Hong Kong, activist short-seller Gotham City published more details about allegations it had made a week prior regarding undisclosed third-party transactions.
Gotham claims that AAC, which makes smartphone speakers, used at least 20 suppliers controlled by family members of chief executive Pan Zheng Min.
This was done to offload about CNY1.5 million in order to boost margins and also to avoid Apple’s stringent labor requirements.
Gotham had criticized AAC for having “unusually high” margins compared to its peers. AAC’s shares plunged another 11% yesterday as a result.
Analysts are starting to get very nervy about the Hong Kong-based company. In a note this morning, Jefferies’ Rex Wu said that AAC needed to put up evidence to refute the allegations in order for its shares to stop bleeding:
We want clarifications on the following questions:
1) shareholder background of these companies,
2) if not connected, whether they sacrifice margin when dealing with AAC and
3) any Apple business involved.
We expect continuous pressure on the stock before seeing solid evidence.
This evidence includes details on the real identities of several individuals involved with the third-party suppliers named in the Gotham report.
Wu also points out that it makes no sense for third-party suppliers to sacrifice their own margin in order to prop up AAC’s, so this needs to be cleared up too.
Jefferies still has a price target of HKD90 on this stock, or about 9% upside from its current price.
AAC was up about 1.6% in Hong Kong trading this morning, paring some of the near 30% the shares have shed since the start of the month. The shares are still up 265% in five years.
AAC denies any wrongdoing.
Source: Barron's Asia
http://www.barrons.com/articles/aac-tec ... 1495160454
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