CITRON REPORTS ON EVERGRANDE REAL ESTATE GROUP LTD PDF

Published by on January 16, 2020
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to these bribes, subsequent land purchases, and related real estate construcnon acnvines, Evergrande has employed a Source: Evergrande filings, Citron research. Note: Evergrande reported 35bn of equity including minority interests. .. Hunan Xiongzhen Investment Co., Ltd (湖南雄震投資有限公司). [1]. Andrew Left heads a Los Angeles-based company, Citron Research, an in- depth analytical report on Evergrande Real Estate Group Ltd, now. Evergrande Real Estate Group Limited concerning the Group in the Report. relation to a report (the ”Report”) issued by Citron Research.

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Counsel for Mr Left argued that negligence was not properly to be read as applying to all persons but only to those persons who, by their actions, had an existing duty and a standard of care to meet and it had to be demonstrated that the person stood in or had assumed a special relationship to the market, e.

He did not seek any expert advice on the accounting standards that applied to Evergrande or approach the company for comment first. He went ahead without such advice while still retaining the sensationalist language of the Draft, language that of itself, he must have appreciated would cause a degree of consternation among members of the investing public.

He had been prompted to do so on this occasion by the receipt of an anonymous package containing a lengthy analysis of Evergrande Draftmaking serious allegations of insolvency and fraudulent accounting. Recklessness The test in respect of recklessness which is subjective was: Likely effect on the market The Tribunal made it clear that the test was a predictive, objective test, namely the Tribunal was required to ask itself not whether the posting of the Report on the Internet did have an impact on the Hong Kong market by inducing the sale or purchase of Evergrande shares, but instead was required to determine whether, having regard to all relevant factors, it was probable at the time when the Report was posted that it would have such an effect.

Accordingly, the Tribunal had no difficulty in determining that the Report, when posted on the Internet, was very likely, within a matter of a few hours, to have a material impact on the trading in Evergrande shares on the Hong Kong market. Previous Item Next Item. The MMT considered that, as someone who held himself out as an expert in detecting corporate fraud, Left should either have sought expert accounting advice or sought comment from Evergrande, as regulated analysts often do.

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It ruled that whether Left was negligent would be judged by whether Left took the care that a reasonably prudent market commentator or analyst would take.

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This was its first report on a Hong Kong listed company. The report quickly became news internationally, being picked up by equity researchers and news services around Likely effect on the market The Tribunal made it clear that the test was a predictive, objective test, namely the Tribunal was required to ask itself not whether the posting of the Report on the Internet did have an impact on the Hong Kong market by inducing the sale or purchase of Evergrande shares, but instead was required to determine whether, having regard to all relevant factors, it was probable at the time when the Report was posted that it would have such an effect.

Left also argued that negligence should be judged differently for those who did not have a special relationship to the market by being company insiders or analysts, as people outside these categories assumed no duty of care to the market.

There was no dispute that Mr Left headed the research team who prepared the Report and had authorized its dissemination on the Internet, by giving the relevant instructions.

The Hang Seng Index only fell 1. Section 1 of the SFO prohibits dissemination of false or misleading information about securities or futures that is likely to induce another person to trade in the securities or affect the price of the securities. Search by Service Area.

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The Tribunal found that Mr Left had engaged in market misconduct, contrary to s. Later, Evergrande held a telephone conference with analysts again denying the allegations.

Evergrande, the second-largest mainland China developer by sales, has grown aggressively using debt to fund land purchases, though its acquisitions have slowed this year.

Comments As the Tribunal emphasised in its ruling, the purpose of s. Nor did he approach Evergrande for clarification of those matters.

View Binder — add content to your binder to download and print: But, a review of the decision suggests that it is a cautious consideration of the risk that false or misleading statements about listed companies pose for investors who can be panicked into trading decisions based on the resulting false or misleading information.

In the report, Citron said Evergrande was a good opportunity to short sell and that Citron might hold a short position. Keep up the good work, it’s most appreciated!. This is eetate rare case, though, of a mainland property company being accused of outright financial mismanagement.

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The test in respect of negligence which is objective was in compiling and publishing the Report, did Mr Left exercise that level of care to avoid the inclusion of false or misleading information as to material facts that is realistically required of a reasonably prudent person carrying out the function of a market commentator or analyst? It ruled that Evergrande had not used trust financing as a means of concealing off-balance sheet debt, rather as a means of financing the buying of land.

This is a business name of Andrew Left. The report alleged that Evergrande had used off-balance sheet joint ventures to dishonestly substantially under-report its debt.

Deacons – Peter So. On 26 Augustthe Market Misconduct Tribunal Tribunal found that Andrew Left had engaged in market misconduct, having published on a website, a false and misleading report Report regarding a company listed on the Hong Kong Stock Exchange, following which there was a substantial fall in its share price.

Section 1 of the Securities and Futures Ordinance SFO Section 1 of the SFO prohibits dissemination of false or misleading information about securities or futures that is likely to induce another person to trade in the securities or affect the price of the securities.

That day, a number of prominent banks issued reports disagreeing with the Citron report. Background Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website. The Tribunal found that he was reckless when he published the Report, having consciously disregarded the real risk that the Report was false and misleading as to material facts.

Comments As the Tribunal emphasised in its ruling, the purpose of s. He suggested this would better protect freedom of speech. Andrew Left heads a Los Angeles-based company, Citron Research, which publishes stock commentaries on its website.

Misleading the market: an analysis of the Citron Research case

The requisite elements that must be proved are: Register now for your free, tailored, daily legal newsfeed service. Republication or redistribution of Reuters content, including by caching, framing, or similar means, is expressly prohibited without the prior written consent of Reuters. Citron Research issued the report.