If you follow the forestry sector in Canada you may remember that shares of Sino-Forest Corporation took a beating during early June 2011. This was mainly caused by a massive sell-off. This sell-off was sparked by a questionable research report out of the U.S. which asserted that Sino-Forest was a fraud. Let’s take a look at the history of Sino-Forest as well as some of the reasons for the stock prices and the allegations against them and how this would affect wealth management.

At its peak, Sino-Forest was Canada’s largest forestry company by market cap and even at its depressed price it was one of Canada’s larger wood products firms on the Canadian stock market.  Its operations were in China meaning that they caused more concern than other Canadian companies. This was coupled with heightened investor skittishness over company disclosures and the markets in general that existed at the time. All of these factors made it ripe for attack by those with an interest in seeing the share price decline sharply.

Sino has appointed an independent audit committee to defend itself against the notion that it is a fraud.  Experts continued to monitor this story, as it would have far-reaching consequences on Canada’s reputation as a place to invest in the materials sector and in money market funds.

 

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