Spreadtrum Communications Latest Target In Muddy Waters Report

HONG KONG (Dow Jones)--Shanghai-based, U.S.-listed Spreadtrum Communications Inc. (SPRD) has become the latest target of Muddy Waters LLC, after the broker declared a short position in the shares, citing a "high risk of material misstatement" in the chip designer's 2010 and 2011 financial accounts.
Muddy Waters posted on its website Tuesday a copy of the nine-item letter sent to the Spreadtrum's chairman.
The document focused on the key management changes, including the resignation of the company's founder and chief executive, as well as its chief financial officer, both of whom stepped down in the span of a few months in the first half of 2009.
In a statement released in Shanghai on Wednesday, Spreadtrum said it would hold a conference call shortly before the start of U.S. trading hours. No reasons or topics were specified for the call, which was scheduled for 8 a.m., EDT.
Spreadtrum's shares fell as much as 34% mid-session on Tuesday after news of the Muddy Waters report, but later pared back losses to end 4.6% lower. The weakness persisted in after-hours trading however, with the shares eroding a further 2.2%.
Earlier this month, Toronto-listed Sino-Forest Corp. (SNOFF, TRE.T) saw its share price collapse after research by Muddy Waters raised questions over its books, and may have sparked Paulson & Co., run by hedge-fund titan John Paulson, to sell off its holdings in the company.
Among concerns highlighted in the Muddy Waters' report on Spreadtrum were the firm's sharp rise in revenue during the third quarter of 2009, numbers that point to improving business conditions around the time founder Ping Wu resigned as chief executive officer in February.
"Why would the board have lost confidence in Mr. Wu when the sales pipeline was so promising?" said the letter, written by Muddy Waters chief Carson Block.
The letter also asked for details on Spreadtrum's market-share growth by product types in 2010. Block pointed out that some companies in the sector were experiencing headwinds, while competitor Qualcomm Inc. (QCOM) saw only modest growth.