not vested
Short-seller targets AAC Technologiesby Carrie Chen
The share price of Apple supplier AAC Technologies Holdings (2018) fell by as much as 13.5 percent yesterday, after short-seller Gotham City Research opened fire on it.
Gotham City first alleged that AAC has more than 20 undisclosed related party suppliers owned by the company's chief executive's family members or employees.
"These undisclosed parties were not listed in Apple's supplier list, despite some claims otherwise," the report said.
In addition, Gotham City questioned the component maker's operating profit margin since 2014, saying it has been
"unusually high and smooth" compared to that of its peers and Apple.
"We're intrigued by it because its margins are higher, smoother than some of the best companies in the world," said Daniel Yu, founder of Gotham City.
"In my experience, that usually means that the company is a truly world-changing, excellent, highly- competitive company - or something else. And based on our investigation, we think the facts support the latter possibility," Yu said.
The short-seller expected AAC's share price to decline to HK$40 to HK$50.
AAC denied the allegation, saying the information in the report are "inaccurate and misleading," according to a filing to the Hong Kong Stock Exchange.
The Shenzhen-based company said it is seeking legal advice and reserves the right to take legal actions.
AAC executive director Richard Mok Joe-kuen said the company's profit margin over the past 10 years was fully supported by audit reports.
AAC yesterday closed 10.95 percent lower at HK$98.85. Before yesterday, the stock was this year's best performer on Hong Kong's benchmark Hang Seng Index with a 58 percent gain.
Some analysts questioned Gotham's conclusions. BOC International Holdings' Tony Zhang, who has a "buy" rating on the stock, described the report as "groundless" and said many Apple suppliers enjoy high profit margins. His critique was echoed by Sanford C Bernstein & Co's David Dai.
"I read the report," said Dai, who has a "market perform" recommendation on AAC. "There is no hard evidence there, only speculation."
AAC is Gotham's first target in Asia. Named after the city where comic-book hero Batman fights crime, Gotham began publicly betting against companies after Yu got burned by an investment in mortgage lender Freddie Mac in 2008.
The firm's report on Quindell Plc triggered a 39 percent one- day drop in the British technology firm in April 2014, while its July 2014 report on Let's Gowex SA preceded the Spanish wi-fi provider's filing for insolvency and its chief executive resigning after admitting he reported false financial results for at least four years.
Source: The Standard
http://www.thestandard.com.hk/section-n ... ?id=182789
It's all about "how much you made when you were right" & "how little you lost when you were wrong"