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China Green Agriculture Inc (CGA US)

Year: 2014

Chinese fertilizer producer, China Green Agriculture (CGA), listed in the US via a reverse merger in 2008. In September 2010, it was attacked by short-seller Alfred Little which alleged that the company had not properly addressed a prior report (now unavailable) claiming that CGA was a fraud. Four months later, in January 2011, short-seller J Capital published another report which made similar fraud allegations. These reports failed to prompt any resignations although CGA's share price de-rated and profits began to fall from FY12 onwards, similar to many other companies accused of fraud. Four years after the initial allegations were made, in October 2014, GeoInvesting made more allegations of fraud. However, once again, this failed to prompt any resignations. CGA triggered our Fake Cash Flow Fraud model almost continuously between FY07 and FY18. In FY19 and FY20, the company began to report substantial losses owing to provisions against receivables and inventory write-downs. Arguably, it was winding the fraud down. Despite many years of reporting profits and free cash inflows, the company only paid one dividend, in January 2015. Although it seems highly likely that CGA was faking profits for years, it managed to retain an auditor (albeit obscure) and keep its audit committee under control. As such, the allegations remain unproven.

Last updated December 2021

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