China’s richest man might have been running a massive fraud

The only thing we know for sure is that stock in Hanergy Thin Film Power, a solar panel company equipment owned by what was at the time China’s richest man, fell 47 percent last Wednesday. We don’t know exactly why it fell, or even how much its Chairman Li Hejun lost when it did, since he apparently upped his bet against his own company in the days before the crash. Just that it did.

When you put all the pieces together, though, it looks even worse. It looks like Hanergy might be China’s Enron: an Energy Company of the Future™ whose stock price could only go up as long as it was borrowing money and could only borrow money as long as its stock price was going up. In other words, a house of cards that was just waiting for the first piece to fall.

Now, the first thing to know about Hanergy is that it’s really two companies. There’s the privately owned parent corporation, Hanergy Group, and the publicly traded subsidiary, Hanergy Thin Film Power (HFT). So far, so normal. The curious part, though, is that almost all of HFT’s sales are to its parent company at a net profit margin of 50 percent. And even more curious is that the parent company hasn’t actually, well, paid for most of the solar panel equipment it’s ostensibly bought from HFT. Through 2013, only 35 percent of the accounts between the two had been settled.

 

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/05/27/chinas-richest-man-might-have-been-running-a-massive-fraud/

 

 

Related Posts

  • 63
    (Source : http://qz.com/486476/everything-youve-heard-about-chinas-stock-market-crash-is-wrong/ ) This week’s Chinese stock market implosion has been widely viewed as a reaction to the Chinese government’s devaluing the yuan on Aug. 11—a move many presume was a frenzied bid to lower export prices and strengthen the economy. This interpretation doesn’t stand up to scrutiny. First, Chinese…
    Tags: china, money, stock, crash
  • 63
    The yuan will be able to trade as much as 2% on either side of a daily central bank reference rate, compared with the current 1%  
    Tags: china
  • 56
    Anglo American Plc dropped to a new record low after scrapping its dividend for the first time since 2009 and pledging deeper spending cuts to help the mining company withstand a collapse in commodities. The company will suspend its payouts for the second half of this year and for 2016,…
    Tags: company, time, fall, china, exactly, crash
  • 54
     A recent academic report on wealth inequality in China shows that the top one percent of households holds one-third of total assets, while the bottom fourth holds only one percent. The report, published by a research institute in Peking University, says the Gini coefficient, better known for its application in…
    Tags: china, china's