China Huishan Dairy Holdings Co. disclosed on Monday that it is missing most of its cash and that it has fallen more deeply in debt, adding to investor worries about the company’s future.
The company, one of China’s biggest dairy farm operators, said in a stock-exchange filing that it should have had about 2.9 billion yuan (US$426 million) in cash and cash equivalents as of March 31.
Instead, as of May 31 the firm could locate only about 467 million yuan, most of which is tied up in restricted bank deposits, it said, according to the Wall Street Journal.
“This significant discrepancy is subject to further clarification,” Huishan said in the filing, adding that the company has “encountered tremendous difficulties” in preparing its financial statements due to the “resignations of key personnel in the group’s treasury department.”
Huishan announced that it will hire a forensic accountant to investigate the matter.
The company said that it was 26.73 billion yuan in debt at the end of March, up from about 16.04 billion yuan just six months prior.
It added that, as of last week, there are 16 new legal proceedings against the company by creditors claiming a total of about 422 million yuan.
The filing is the latest in a series of disclosures that followed a sharp drop in Huishan’s stock, leading to trading of its shares being halted on the Hong Kong stock exchange, the Journal noted.
Ge Kun, an executive director and co-owner of the company, disappeared after sending a letter dated March 21 to Huishan Chairman Yang Kai, saying she was taking a leave of absence due to “recent work stress” and didn’t want to be contacted.
The company disclosed after her disappearance that in addition to being responsible for sales and branding, human resources and government affairs, she also oversaw its treasury operations and banking relationships.
A few days after Ge sent the letter, Huishan’s stock price collapsed, falling 85 percent in less than an hour—wiping out more than US$4 billion in market value.
The company still hasn’t been able to explain the share plunge, and trading in its shares has remained suspended in Hong Kong.
Nine of its 10 board members have since departed, leaving just the chairman, Yang.
Huishan initially came under spotlight in December when short seller Muddy Waters issued a report claiming the firm had overstated its profit and falsely claimed to be self-sufficient in producing alfalfa.
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