(EnergyAsia, January 7 2013, Monday) — China oil storage and distribution company Longwei Petroleum Investment Holding Ltd said it will defend itself against fraud allegations published in a report last week that caused its NYSE-listed stock price to plunge from around US$2.62 a share to US$0.62 before it was suspended.
The stock was trading near a two-year high when a short-selling firm Geo Investing released its report on January 3, alleging Longwei had exaggerated sales revenues at its main Taiyuan and Gujiao storage terminals in China as well as failed to disclose a US$32 million investment in a tourism business made by its subsidiary Shanxi Zhonghe Energy Conversion Co Ltd.
Following the stock plunge, at least three US law firms announced separately that they had launched investigations against Longwei Petroleum.
Bronstein, Gewirtz & Grossman LLC said it is investigating potential claims on behalf of the Longwei’s shareholders on whether the company, its subsidiaries and their executives had violated US federal securities laws while the Rosen Law Firm said it has filed a class action lawsuit on behalf of investors who had bought the company’s shares between May 17 2010 and January 3 2013. Bernstein Liebhard LLP said it is looking into allegations that the Chinese firm may have issued materially misleading information to the investing public.
Longwei, which suspended stock trading on the NYSE the same day, said it would consider taking “necessary and appropriate course of action in response to the allegations.”
Longwei said the Geo Investing report contains numerous errors of facts, misleading speculations and malicious interpretations of events.
“These types of allegations appear to be consistent with similar attacks against other Chinese companies by noted short sellers, which have later been proven to be inaccurate,” it said.
Geo Investing previously exposed fraud at three other Chinese firms listed in US stock exchanges.