Chinese coal distributor, Winsway Coking Coal, listed in the Hong Kong exchange in October 2010. The company was initially identified as risky within the infamous Moody's "Red Flags for Emerging Market Companies" in June 2011. Seven months later, in January 2012, Winsway was targeted by short-seller Jonestown Research which alleged that it was committing securities fraud by overstating inventories, amongst other allegations. Although Winsway's financial and share price performance continued to deteriorate, the fraud allegations were not substantiated. 

Last updated September 2023

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Winsway Coking Coal distributes and transports coal from Mongolia and other countries into China through its integrated service platform which includes logistics parks, coal washing plants, and road and railway transportation capabilities along the coast, rivers and inland borders of China, including Inner Mongolia.

The company listed on the Hong Kong Stock Exchange (HKEx) in October 2010, raising HK$3.97bn (US$510m). The managers of the offering were Bank of America Merrill Lynch, Deutsche Bank AG/Hong Kong and Goldman Sachs (Asia). An additional share offering on 25 May 2011 raised HK$639m (US$820m).

On 11 July 2011, Moody's ratings agency issued a report on risky business models and governance in China; "Red Flags for Emerging Market Companies: A Focus on China". Winsway Coking triggered 11 out of a possible 20 red flags. In its review of Winsway Coking, Moodys said:

"Our ratings for Winsway, a coking-coal logistics business, take into account the company’s short track record and plan for rapid expansion. By quintupling its procurement of Mongolian coal from 1.3 million tons (MT) in 2008 to 6.5MT in 2010, the company triggered several red flags in its build-out of needed infrastructure, which put pressure on working capital and resulted in negative free cash flow, along with a fast rise in revenue.

The ratings also reflect a red flag for related-party transactions because the company’s chairman has both majority ownership of Winsway and external, commodities-trading businesses, which facilitated the debut and growth of Winsway’s operations. Nevertheless, reported related-party transactions have been immaterial, and the chairman has a non-compete agreement with Winsway."

On 12 July 2011, following a more than 5% drop in its price share, Winsway Coking issued an announcement. It said the company noted the report issued by Moody and it did not believe it appropriate, at this moment, to comment on reports of third parties, including the Moody’s report, but wished to emphasise that this should not in any way be taken to imply acceptance of any statements or conclusions in such report regarding the company or the company’s business.

On 19 January 2012, Jonestown Research released a Fraud Alert report on Winsway Coking. It believed the company was committing fraud with respect to falsified financial statements and misrepresentations regarding related parties. Also, that the scale of its business was much smaller than the company claimed. The reasons Jonestown gave for its assertions were:

• Winsway’s balance sheet inventory values could not be reconciled with the tons of coal inventories that should have been on the balance sheet. Jonestown estimated that Winsway’s inventory was overstated by about HK$1bn as of 1H11.
• Official China import data showed volumes far lower than those Winsway reported.
• It believed Winsway’s key transportation provider, Moveday, was actually an undisclosed related party. Jonestown also noted that Moveday was a beneficiary of a US$40m loan from Winsway. To Jonestown, Moveday appeared to be a shell company. It found no evidence of due establishment in Mongolia, no registration card (record) and had never filed to pay taxes.
• Winsway’s investor presentations contradicted its prospectus with respect to its import process.
• The Moody's report gave Winsway 11 red flags. The highest number of red flags Moody’s gave was 12. Sino-Forest only had 7 red flags.

On 20 January 2012, Winsway Coking issued an announcement responding to the report. It refuted the allegations, clarified its inventory calculations and outlined its dealings with Moveday and other parties mentioned in the Jonestown report.

On 25 June 2014, Winsway Coking Coal Holdings Limited changed its name to Winsway Enterprises.

On 23 August 2016, Winsway Enterprises Holdings Limited changed its name to E-Commodities Holdings Limited.

COMMENT: Following the Jonestown report, Winsway's financial and share price performance continued to deteriorate, leading to losses from FY12 to FY15, culminating in a debt standstill agreement in 2015. Failure to publish interim 1H15 financials in August 2015 stemming from uncertainties relating to the US$500m senior notes led to a prolonged share trading suspension (until March 2016). While deteriorating financial performance is relatively common once credible fraud allegations have been made against companies, there is no indication of any fraud. As such, the fraud allegations are unsubstantiated.

Moodys: Red Flags for Emerging Market Companies - A Focus on China, 11 Jul 2011
Market Watch: Moody’s warns on China firms, hitting shares, 11 Jul 2011
Winsway Coking Coal Holdings: Announcement, 12 Jul 2011
Jonestown Research: Winsway - Fraud Alert, 19 Jan 2012
Winsway Coking Coal Holdings: Response to Report, 20 Jan 2012
Reuters: China coal firm rejects fraud claims after shares tank, 19 Jan 2012
Bloomberg: Winsway Coking Coal Denies Fraud Claims in Anonymous Report, 20 Jan 2012
Bloomberg: Winsway Hit by Short Sellers as Coal Deal Offers 115%, 9 Feb 2012
GMT Research: Winsway Coking Coal Holdings AGS FY 2011
Winsway Coking Coal Holdings: Annual Report, YE Dec. 2012
Winsway Coking Coal Holdings: Annual Report, YE Dec. 2011
Winsway Coking Coal Holdings: Annual Report, YE Dec. 2010
HKEx: Winsway Coking Coal company Filings