Muddy Waters fraud claims hammer Anta Sports stockBusiness | 8 Jul 2019 1:04 pm
Shares in Anta Sports (2020) fell by 7.32 percent to HK$51.25 in morning trading today, after short seller Muddy Waters said the mainland sport's wear producer fraudulently inflated its revenues.
Muddy Waters said it has "smoking gun" evidence that Anta secretly controls 27 distributors through proxy owners, including at least 25 as tier one distributors, which Anta claims as independent third parties. The number of tier one distributors that Anta controls could be over 40 of the 46 the company has. The secretly controlled distributors accounted for about 70 percent of ANTA brand sales, Muddy Waters said.
The short seller believes Anta controls the distributors to fraudulently inflate its reported revenues and/or decrease its reported expenses.
Anta has not yet responded to the short selling report.
In 2018, net profit at Anta gained by 32.9 percent year-on-year to 4.1 billion yuan (HK$4.64 billion), while revenue grew 44.4 percent year-on-year to 24.1 billion yuan, according to its annual report which released on Feburary.