Anonymous, best known for its social justice hacktivism, appears to have targeted Tianhe (HKG:1619), an $8-billion Chinese chemical company, with a scathing investigative report that calls the recently publicly listed company a “massive fraud.”
These allegations were made in a report by Anonymous Analytics, a stock research and analysis group which calls itself a “faction” of the hacktivist collective Anonymous. The report alleges that Tianhe’s real financial situation reported in tax filings in China was vastly different than the one it reported to investors via its Initial Public Offering prospectus. In 2012, the report alleges, Tianhe’s revenue was some 85% less than reported.
According to the report, Tianhe sold the vast majority of its products to shell corporations controlled by its management. When researchers visited the offices, they found them empty.
Further, Tianhe’s own reports show that it claims to have sold more anti-mar agents — used to chemically treat touch screens to make them fingerprint resistant in the production process — is double the entire global demand for the chemicals. The report noted that Tianhe didn’t have size of connections to the Shenzhen ecosystem necessary to be a sizeable player in the business.
This isn’t the first report from the group, but it’s proving to be the most controversial as Tianhe — which listed on the Hong Kong stock exchange a mere three months ago — has voluntarily suspended trading until the issue is resolved.
The style of report presented by Anonymous Analytics is commonly used by short seller firms which monitor publicly listed companies for fraud (analysts only use publicly available information). Of recent years the most famous short seller report against a publicly listed Chinese company was Muddy Water’s attack on Sino-Forest, a Chinese forestry management consulting company that was listed in Toronto. The aftermath of this led to the company’s collapse, criminal charges, and reform to the way the TSX lays out rules for Chinese firms listed on its exchange.
Tianhe, for its part, strongly denies the report and says it will be issuing a counter report as soon as practically possible. Anonymous Analytics has published reports critical of other Chinese companies in the past, such as Huabao International and Qihu 360 but these reports proved to be inconclusive.
A mainstream product from Anonymous?
For as much clout as Anonymous would like to think it has, its antics of vigilantism — occasionally targeting the wrong person out out accident — are equally as alienating as they are endearing. Unlike many short selling firms, such as Muddy Waters, Anonymous’ report does not contain by-lines or any sort of identifiable authorship making it lack some credibility.
At the same time it’s hard to argue that combating fraud in publicly listed companies with murky backgrounds is an alienating activity or a poor use of resources. The allegations presented in the report, if true, would lead to an investigation of both sides of the Pacific and stop the company dead in its tracks. Preventing fraud, and losses of innocent people’s money, is certainly a form of social justice.