Aluminium producer China Zhongwang Holdings' share price rebounded 11% yesterday after it unveiled it had signed a framework agreement to acquire Qinghai province-based Qinghai Guoxin Aluminium Industry for about 1.2 billion yuan (HK$1.37 billion), reports the South China Morning Post.
On Tuesday, Zhongwang's market valuation fell 27.26% after it failed to explain why its earlier assurance that its financial statements had "no deficiencies" was not fully supported by Ernst & Young, reveals the newspaper.
Last year, Ernst & Young was asked by China Zhongwang Holdings to review the information and claims made in the aluminium-maker’s initial public offering (IPO) prospectus in April, when it raised a massive HK$9.8 billion (US$1.3 billion) in Hong Kong. Last year, Zhongwang’s decision to float an IPO was a hot topic of debate. Many questioned the wisdom of going public in a recessionary environment, even by one of China’s largest aluminium manufacturers.
Meanwhile, the Post says that, in a statement to the Hong Kong stock exchange, Zhongwang reveals that Ernst & Young had reported facing "external limitations in its verification procedures which require information of independent third parties." The company said Ernst & Young had suggested to its audit committee that "certain steps be taken to address some of the limitations."
Early this year, Zhongwang baffled hedge fund short sellers when its stocks rallied for eight days. In its April listing prospectus, the firm said that less than 3% of its sales came from outside the mainland in 2008. By September, 25% of the sales came from overseas.