China Medical's investors petition for liquidation

Seven years ago, China Medical Technologies ($CMED) rode a wave of investor interest in Chinese medical device and biotechnology companies in the U.S. markets.

This week, however, China Medical is close to uttering the last gasps of a dying company. Bloomberg reports that the company's value posted the biggest two-day drop since April in New York, following a disclosure that the Beijing-based company's bondholders had filed a petition for liquidation. As a result, American depositary receipts for the company traded on the U.S. over-the-counter market dropped 8.6%, the story notes, to $4.65 in New York. On June 15, they dropped 14%. (China Medical is registered in the Cayman Islands.)

The action comes after China Medical Technologies faced accusations in December that it defrauded investors over an acquisition, and the notion that it failed to generate free cash flow for most of its history. China Medical said at the time that the accusations were based on "innuendo" and not legitimate, based on matters long disclosed in the company's press releases and annual reports. Investors didn't like that either and drove the stock price down. It's unclear yet if the investor filing for liquidation is connected to those earlier fraud accusations.

Things have been going badly for a while, anyway. In March, the Nasdaq stock exchange said it was delisting the company's American depository receipts. Even more ominous, the company defaulted on an interest payment that was due Dec. 15, 2011. The issue concerned 6.25% convertible bonds that mature in December of 2016, Bloomberg explained.

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