TORONTO — The largest shareholder in troubled Chinese timberland company Sino-Forest Corp. (TSX:TRE) continued to buy shares in the company just days before the provincial regulator fired allegations of fraud and stopped trading in the firm.
According to regulatory filings, New Zealand billionaire Richard Chandler bought 1.2 million shares in Sino-Forest at an average price of $4.65 on Aug. 24, two days before the Ontario Securities Commission halted trading in the stock with a temporary order and accused the company of fraud.
The purchase brought Chandler’s holdings in Sino-Forest to 48 million shares or a roughly 19.5 per cent stake in the company.
Shares in Sino-Forest were hammered earlier this summer after short-seller Muddy Waters Research first launched allegations that the company exaggerated sales and assets.
However, the stock had recovered in recent weeks as investors bet that the company would be cleared.
The stock, which had fallen as low as $1.29, last traded in Toronto for $4.81. Though the OSC halted trading in Sino-Forest on the Toronto Stock Exchange, shares in the company were crushed in U.S. trading after the allegations by the regulator on Friday and were down roughly 70 per cent.
On Monday, Moody’s Investors Service slashed its rating to Caa1 from B1 and warned of the potential of a further downgrade, while Standard & Poor’s withdrew its ratings on the company altogether due to the lack of reliable information, but not before cutting its rating to CCC-.
The move followed the resignation of Sino-Forest chief executive Allen Chan from the chairman’s role at Sino-Forest on Sunday.
Sino-Forest was once the most valuable forestry company listed on the TSX, ahead of such household names as lumber producer Canfor Corp. and paper producers such as Domtar and Abitibi-Bowater.
The company launched an investigation by an independent committee earlier this year after the allegations were first made by Muddy Waters.
The company recently said that its investigation would take longer than the two to three months initially expected and now is slated to be complete by the end of year.