Canadian-listed Sino-Forest Corporation was a stock market darling until an independent research firm claimed last summer that the company had shorted its securities. Since then, a number of union pension funds that hold securities in Sino-Forest have been pursuing class action suits against the company.
Sino-Forest operates commercial forest plantations in China, according to its Web site. The company entered the public markets through a reverse takeover in 1994 and raised more than $950 million through three prospectus offerings between 2007 and 2009. Subsequent placements boosted that figure to around $2.7 billion. Last June, Muddy Waters Research published a report alleging that Sino-Forest had materially overstated its assets and profits. The report concluded that the company’s securities were worthless. Later that month, The Globe and Mail newspaper published similar results from its own investigation. Sino-Forest denied the allegations, but by June 22 its shares had lost almost 90 percent of their value and were trading in the $2 range, down from a high earlier last year of almost $25. Trading in Sino-Forest shares was halted in August by the Ontario Securities Commission, which accused the company’s executives of engaging in fraudulent activity, conducting related-party transactions, and overstating some of the company’s timber holdings.
