Market Commentary and Intraday News
Suntech investigating whether it was fraud victim
293 days ago
(AP:NEW YORK) The Chinese solar company Suntech Power has acknowledged that it may be the victim of a multimillion dollar fraud after a partner in a solar development said it would put up German bonds as collateral that may never have existed.
Shares plunged 15 percent to an all-time low with investors trying to get out of the way.
Suntech said that it was investigating the security interest it received for its 554.2 million euros ($683 million) investment in Global Solar Fund S.C.A. The company said it got a pledge of German government bonds in the amount of 560 million euros ($690 million).
Suntech discovered the problem after hiring outside lawyers to look into raising revenue from the investment in GSF. The lawyers found evidence that "the bonds may not have existed and Suntech may have been a victim of fraud," the company said.
"Oops," Raymond James & Associates Inc. said in a note to clients. Analysts with the firm wondered how things could get any worse for Suntech, which is already struggling with a high debt-to-capital ratio and slim profit margins.
Suntech said there was no indication that its management was involved and that it is "vigorously pursuing all avenues to resolve this matter" and protect shareholders.
However, the company's second-quarter financial report may be on hold until the investigation is completed.
Suntech makes solar products for residential, industrial and utility customers.
In U.S. trading, the shares fell 24 cents, or 15.1 percent, to $1.33 at midday.
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