China Medical Technologies ($CMED) saw its shares plunge after Glaucus Research Group, an online research firm, accused the company of defrauding investors.
In its report, Glaucus accuses the company of radically overpaying for an acquisition from a seller the group thinks was secretly related to its chairman. The reports further says the chairman orchestrated the acquisition to embezzle roughly $20 million to $23 million from the public company.
The report also dubs the company as a "serial capital raiser" that failed to generate free cash flow for most of its history and maintains its balance sheet "presents numerous highly suspicious red flags."
China Medical has fought back against the accusations, saying they involve matters that have been disclosed in the company's annual reports and press releases. Furthermore, they "misrepresent the information they present and attribute motives to management that are based on innuendo."
As Reuters notes, this marks just the latest accusation of fraud against a Chinese company listed in North America.
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