Hindenburg Research Shorts HF Foods Group
Forensic financial research firm Hindenburg Research has announced a short position in HF Foods Group.
Hindenburg says that HFFG's 2019 merger with food distributor B&R "appears to be a blatant undisclosed related-party transaction" because "we found multiple documents showing that both HF and B&R were part of the same Chinese investment group for years prior to the acquisition." Hindenburg claims that HFFG's trucking subsidiary used shareholder cash to buy an undisclosed fleet of 'exotic supercars' and HFFG's auditor "has been asleep at the wheel".
Finally, Hindenburg Research says that the B&R merger more than doubled HFFG's share count, and FTSE/Russell mistakenly included almost all of these shares as part of the company’s free float, which sent HFFG’s price and volume soaring on Friday’s index rebalancing. "We think this mistake may be reversed" says Hindenburg's note. "We believe HF and its insiders are masking the true number of shares held by its affiliates. Once made clear to FTSE/Russell, we expect the recent forced index buying in HF will reverse and become forced selling."
Hindenburg says that it sees 90%+ downside in HFFG's share price.
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