One of China’s largest listed drugmakers, Kangmei Pharmaceutical Co. Ltd., has asked the Shanghai stock exchange to suspend trading of its shares from Monday, after regulators confirmed the company fabricated its financial reports between 2016 and 2018, said Caixin.
The China Securities Regulatory Commission (CSRC) Kangmei had used fake bank deposit slips to inflate its cash reserves, forged documents for non-existent business activities, and transferred company funds to related parties to trade in its own stock.
Several audit professionals told Caixin they were concerned that there may be problems in Kangmei’s financials beyond accounting errors, given the vague language and lack of logic in its corrected financial statement. The company may have intentionally inflated its cash holding and inventories to boost profit, they said.
Kangmei made efforts to limit the damage, confirming in a stock filing that the company moved RMB 8.88 billion ($1.28 billion) through affiliated companies to purchase its own shares. It admitted that the practice made it “difficult for investors to judge the company’s prospects and investors’ rights and interests may have been damaged,” in a filing with the Shanghai exchange.