Aug. 20 (Bloomberg) -- SinoTech Energy Ltd., a provider of equipment to boost oilfield production, was sued in the U.S. by an investor claiming securities violations after its shares plummeted.
Investor Bhushan Athale alleges that Beijing-based SinoTech’s financial reports were “inaccurate because the nature, size and scope of the company’s business was materially exaggerated,” according to a complaint filed yesterday in Manhattan federal court. Athale is seeking to sue on behalf of buyers of the company’s American depositary shares since its November initial public offering.
SinoTech plunged 42 percent to $2.35 on the Nasdaq Stock Market on Aug. 16 after Alfredlittle.com published a short- seller’s note saying the company’s largest customers were probably “nothing more than empty shells” and that it’s worth less than 63 cents a share. SinoTech called the note “inaccurate and defamatory.”
Trading has been halted in the shares and the company said in a statement yesterday that it intends to “cooperate fully” with Nasdaq to address the stock market’s concerns. The trading halt has rendered the ADS “essentially worthless,” Athale said in the complaint.
Rebecca Guo, a spokeswoman for the company in Beijing, didn’t return a phone call or respond to an e-mail placed to her office outside business hours in China seeking comment on the lawsuit.
In an Aug. 17 statement, the company said it wasn’t aware of material omissions in its financial statements and that it had appointed an independent committee to investigate.
“We are outraged by this blatantly self-interested, mercenary attempt to profiteer at the expense of SinoTech and its shareholders,” Chief Executive Officer Xin Guoqiang said in the Aug. 17 statement.
The case is Athale v. SinoTech Energy Ltd., 11-CV-5831, U.S. District Court, Southern District of New York (Manhattan).
--With assistance from Nikolaj Gammeltoft in New York. Editors: Andrew Dunn, Glenn Holdcraft
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