Xinhua, a diversified media company in China, operates of five divisions: Media Production, Broadcasting, Print, Advertising, and Research. Over the last eight weeks, twelve law firms have announced that they have filed class action lawsuits against Xinhua Finance. The lawsuits allege that Xinhua and certain of its officers and directors with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, including the failure to disclose and misrepresention of material adverse facts. On May 21, 2007, Barron’s published an article on Xinhua which reported that the Registration Statement for the IPO failed to disclose that Xinhua’s Chief Financial Officer, Shelly Singhal, was simultaneously the company’s CFO and an investment banker and stockbroker, who ran a securities firm that had been under regulatory scrutiny in the past year.
Earlier this week, Xinhua stated that the company expects sales of between $128 million and $133 million for the year, compared with an earlier forecast for $110 million in sales. Since the issuance of the revised guidance statement, the stock has lost nearly 50% of its value, reaching a new 52 week low.
These events have led to the issuance of the following statement by CFC:
“In view of the extensive serious nature of the legal filings against Xinhua Finance Media (NasdaqGM: XFML), China Business Watch SAQ Ratings Service has decided to maintain the suspension of the company’s SAQ Rating status until further definitive information is made available and assessed. CBW will continue to monitor events.”
The Statistical Analysis Quotient Rating (SAQ) Service is an exclusive feature of China Finance Centre that monitors the performance of over 300 stocks of companies with operations in China. The SAQ Report tracks and rates the stocks against a matrix of comparative performance factors, including fundamentals, technical analysis, liquidity, safety, regulatory compliance and timely filings, shareholder relations, and U.S. Trading Market Qualifications. The SAQ rates company performance on a 1-10 scale. SAQ Ratings are published weekly in China Business Watch and updated daily in CBW Daily Ratings Alert service. The ratings and publications can be found at the CFC Web Portal- www. chinafc. net.
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