Credit: In December 2011, Glaucus Research claimed China Medical Technologies ( CMED or CMEDY , quote ) had committed fraud. The company accused China Medical of overpaying for assets formerly owned by their CEO, and the months since have not been good for China Medical.
[caption align="alignright" caption="China Med's FISH genetic markers aren't much help against Wall Street sharks"]
Glaucus is an investigative research company that frequently issues harsh criticism of the companies it covers. The company's website lists four investigative targets over the last year, all "Strong Sells."
China Medical denied the allegations in a December 6 press release, saying that the chairman had no connection to the person buying the assets, and that the assets were appropriately valued at the time of the sale in 2007. According to China Medical, the accusations "misrepresent the information they present and attribute motives to management that are based on innuendo."
This is not the first time Glaucus Research has been questioned. Seeking Alpha called a similar report on L&L Energy ( LLEN , quote ) a " web of lies ," suggesting that Glaucus filed the report "with the intent to benefit a few select parties, while significantly harming a class of individuals and firms (the LLEN shareholders)."
Valid or not, the accusations from Glaucus have added to China Medical's woes, which include debt issues and lack of liquidity. After emerging on U.S. exchanges in 2005, the company posted solid earnings in mid-2008. It began to take on debt to expand distribution and encourage growth, and has since had difficulty managing it and paying interest. Up to its ears in debt, CMED asked its bondholders for a debt restructuring on December 13.
On February 7, NASDAQ halted the company's stocks for and requested unspecified "additional information." A week later, S&P downgraded CMED to "default" after a report that it failed to pay its coupon payment. Fitch has stopped following the company.
Management has released little information to alleviate worries, keeping its shareholders and creditors in the dark. On February 29th, the company became listed on the Over the Counter Bulletin Board where it is now being traded under the symbol CMEDY ( quote ).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
