Two months ago, after Muddy Waters LLC accused Canada’s Sino-Forest of overstating its timber holdings in China, it seemed as if everyone bailed out of the forestry company’s stock. The company’s share price has plummeted nearly 80% year to date and many analysts have downgraded their buy rating on the stock. But that hasn’t stopped some investors from purchasing more Sino-Forest shares.
On July 19, Richard Chandler, an American billionaire, increased his stake in the company to 11%. His fund—the Mandolin Fund Pte, which is operated by Richard Chandler Corp.—bought 2.44 million shares, upping its investment in the company to 26.7 million shares.
Richard Barton, a spokesperson for the Singapore-based private investment firm, said in an e-mail that “Richard Chandler Corporation views its stake purchase as a deep value investment.”
On July 4, another investment firm scooped up a ton of Sino-Forest stock. Boston-based Wellington Management said in a release that day that it owns 28.3 million shares of the company, a huge increase from the 79,700 shares held as of Dec. 31, 2010. That gives the firm an 11.5% stake in Sino-Forest.
Why are people buying? In an interview with Bloomberg, Arthur Salzer, CEO of Toronto’s Northland Wealth Management said that maybe the companies believe that Sino-Forest has more licenses than Muddy Waters thinks it has. “So there might be value there,” he says.
Eric Yan, a fund manager with Toronto’s Matrix Fund Management, told Bloomberg that if investors can stomach the risk, Sino-Forest could be a good bargain. But, he says, “we need more information from the company and a trustworthy independent source like PricewaterhouseCoopers.”
Thanks to these two purchases, plus some other smaller deals over the last few weeks, Sino-Forest shares have climbed $2.18, or 79%, since June 21.
Chandler’s purchase sent Sino-Forest’s share price soaring by 15%; it’s stock price went form $4.28 at close on June 19 to $4.92 by around noon the next day.