Sino-Forest Corporation
Encyclopedia
Sino-Forest Corporation (Sino-Forest) claims to be one of the leading commercial forest
plantation operators in the People's Republic of China
.
needed to produce industrial, commercial and residential wood products. Sino-Forest also holds a majority interest in Omnicorp Limited, an investment holding company
listed in Hong Kong (HK:0094) that claims to import wood fibre into China. Sino-Forest’s common shares have traded on the Toronto Stock Exchange
under the symbol TRE since 1995 and its corporate office is in Mississauga, Canada. Sino-Forest had a market capitalization
of just over $5 billion in November 2010.
As of September 30, 2009, Sino-Forest claims to have had approximately 757,000 hectares of trees under management and over 700,000 hectares of trees available to be acquired under its six long-term master agreements. The company intends to replant 200,000 hectares by 2012.
The company claims that it expects to benefit from China's economic stimulus plan which includes further infrastructure development, rebuilding after Sichuan's 2008 earthquake and building of affordable housing
for rural areas.
The principal activities of Omnicorp’s subsidiaries claimed to consist of log harvesting, lumber processing and marketing and sales of logs and lumber products to China and other countries around the world. Omnicorp claims to own 60.4% of the harvesting and other rights in an 184,000-hectare hardwood forest concession in Suriname, South America and Sino-Forest, through its wholly owned subsidiary Sino-Capital Global Inc. owns the remaining 39.6%. Omnicorp also intends to acquire a high quality radiata pine plantation in New Zealand upon satisfaction of certain conditions as announced on November 3, 2010.
(HKBU).
by Carson Block of Muddy Waters Research, which made allegations that Sino-Forest had been fraudulently inflating its assets and earnings, and that the company's shares were essentially worthless. Muddy Waters claimed that Sino Forest was a “multibillion-dollar Ponzi scheme
” that was “accompanied by substantial theft”. Sino Forest rejected the allegations of fraud and launched an independent investigation by PriceWaterhouseCoopers
. Shares in Sino Forest fell by 82% following publication of the Muddy Waters report, with prominent investor John Paulson
selling his entire stake in the company at a $720 million loss.
On June 30, debt rating agency Standard & Poors downgraded Sino-Forest's long-term corporate credit rating from "BB" to "B+". A second downgrade to "B" followed on August 23.
On August 15, Sino-Forest announced that the results of the PwC probe into the allegations would be delayed to the end of the year due to difficulties in gathering data from the Chinese companies involved. The following week, on August 26, the Ontario Securities Commission
suspended the shares of Sino-Forest, stating that the company had engaged in practices they “knew or should have known” perpetuated a fraud. The OSC also initially ordered that five directors of Sino-Forest resign, but rescinded this demand a few hours later as the Ontario Securities Act does not allow the commission to summarily force the resignation of a company director without a hearing.
Forest
A forest, also referred to as a wood or the woods, is an area with a high density of trees. As with cities, depending where you are in the world, what is considered a forest may vary significantly in size and have various classification according to how and what of the forest is composed...
plantation operators in the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
.
History
Formed in 1994, its principal businesses are claimed to include the ownership and management of tree plantations and complementary manufacturing of downstream engineered-wood products. The company claims to derive most of its revenue from the sales of wood fibreWood fibre
Wood fibres are usually cellulosic elements that are extracted from trees, straw, bamboo, cotton seed, hemp, sugarcane and other sources.The end paper product dictates the species, or species blend, that is best suited to provide the desirable sheet characteristics, and also dictates the required...
needed to produce industrial, commercial and residential wood products. Sino-Forest also holds a majority interest in Omnicorp Limited, an investment holding company
Holding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
listed in Hong Kong (HK:0094) that claims to import wood fibre into China. Sino-Forest’s common shares have traded on the Toronto Stock Exchange
Toronto Stock Exchange
Toronto Stock Exchange is the largest stock exchange in Canada, the third largest in North America and the seventh largest in the world by market capitalisation. Based in Canada's largest city, Toronto, it is owned by and operated as a subsidiary of the TMX Group for the trading of senior equities...
under the symbol TRE since 1995 and its corporate office is in Mississauga, Canada. Sino-Forest had a market capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
of just over $5 billion in November 2010.
As of September 30, 2009, Sino-Forest claims to have had approximately 757,000 hectares of trees under management and over 700,000 hectares of trees available to be acquired under its six long-term master agreements. The company intends to replant 200,000 hectares by 2012.
The company claims that it expects to benefit from China's economic stimulus plan which includes further infrastructure development, rebuilding after Sichuan's 2008 earthquake and building of affordable housing
Affordable housing
Affordable housing is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the...
for rural areas.
Business segments
At the end of September 2010, Sino-Forest Corp had claimed approximately 757,000 hectares of forest plantations located in southern China. Its principal business segments include Wood Fibre Operations (i.e. the ownership and management of plantation trees, the sale of standing timber and wood logs, the trading of wood products sourced domestically and internationally) and Manufacturing and Other Operations (i.e. downstream engineered-wood flooring and panels, seedling nurseries, greenery services).Subsidiaries
Sino-Forest Corporation owns an interest of approximately 60% of Omnicorp Limited (to be renamed Greenheart Group Limited upon shareholder approval), a Hong Kong listed company (HK:0094). In addition, Sino-Forest owns HK$212 million of convertible bonds of Omnicorp, which if fully converted would increase Sino-Forest’s interest to nearly 60% of the enlarged issued share capital of Omnicorp.The principal activities of Omnicorp’s subsidiaries claimed to consist of log harvesting, lumber processing and marketing and sales of logs and lumber products to China and other countries around the world. Omnicorp claims to own 60.4% of the harvesting and other rights in an 184,000-hectare hardwood forest concession in Suriname, South America and Sino-Forest, through its wholly owned subsidiary Sino-Capital Global Inc. owns the remaining 39.6%. Omnicorp also intends to acquire a high quality radiata pine plantation in New Zealand upon satisfaction of certain conditions as announced on November 3, 2010.
ARCPE
Sino-Forest Applied Research Centre for Pearl River Delta Environment (ARCPE) officially opened on 22 June, 2009 at the Hong Kong Baptist UniversityHong Kong Baptist University
Hong Kong Baptist University is a publicly-funded tertiary institution with a Christian education heritage. It is the sole surviving institution of 13 major Christian universities that once operated on the Chinese mainland,...
(HKBU).
Fraud allegations and share suspension
On Thursday 2 June 2011, shares in Sino Forest plummeted following the release of a negative research reportby Carson Block of Muddy Waters Research, which made allegations that Sino-Forest had been fraudulently inflating its assets and earnings, and that the company's shares were essentially worthless. Muddy Waters claimed that Sino Forest was a “multibillion-dollar Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
” that was “accompanied by substantial theft”. Sino Forest rejected the allegations of fraud and launched an independent investigation by PriceWaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....
. Shares in Sino Forest fell by 82% following publication of the Muddy Waters report, with prominent investor John Paulson
John Paulson
John Alfred Paulson is an American hedge fund manager, he is the founder and President of Paulson & Co., a New York-based hedge fund....
selling his entire stake in the company at a $720 million loss.
On June 30, debt rating agency Standard & Poors downgraded Sino-Forest's long-term corporate credit rating from "BB" to "B+". A second downgrade to "B" followed on August 23.
On August 15, Sino-Forest announced that the results of the PwC probe into the allegations would be delayed to the end of the year due to difficulties in gathering data from the Chinese companies involved. The following week, on August 26, the Ontario Securities Commission
Ontario Securities Commission
The Ontario Securities Commission is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario...
suspended the shares of Sino-Forest, stating that the company had engaged in practices they “knew or should have known” perpetuated a fraud. The OSC also initially ordered that five directors of Sino-Forest resign, but rescinded this demand a few hours later as the Ontario Securities Act does not allow the commission to summarily force the resignation of a company director without a hearing.