Four Huishan Dairy Directors Resign; Treasury Head Still Missing

(Bloomberg) -- China Huishan Dairy Holdings Co. said its four remaining non-executive directors resigned and the company still can't locate its treasury head, adding to concern about the indebted farm operator's corporate governance and finances.

The directors tendered their resignations effective March 31, with all four citing other commitments, according to a stock exchange filing late Friday. The Shenyang, China-based company said Ge Kun, who manages the company's treasury and cash operations, was last known to be in Hong Kong and a missing person's report has been filed with the city's police.

An unexplained 85 percent plunge in Huishan's shares on March 24 has drawn attention to the transparency of Chinese listed companies in Hong Kong, with such events becoming a familiar sight. Huishan's creditors held an emergency meeting the day before the rout to discuss a cash shortage at the milk producer, according to Hongling Capital, a peer-to-peer lender that attended the gathering.

The company is reviewing its financial position in Ge's absence, which is taking longer than initially expected, and intends to provide an update in a week's time, according to Friday's statement. A Hong Kong police spokesperson said they were unable to verify whether a missing person report was filed without knowing further details.

Read more: Gadfly's take on the Huishan slump

A Hong Kong court rejected an application by Chinese money manager Gopher Asset Management Co. to freeze assets of Huishan Dairy, according to the same statement.

Majority shareholder Champ Harvest Ltd., controlled by Yang Kai, sold part of its stake as Huishan Dairy plummeted, a separate statement on Friday showed. The holder sold 250.9 million shares at an average price of 39.4 Hong Kong cents apiece on March 24. That alone would have been the highest daily volume since August 2015, and accounted for about a third of the stock that changed hands as Huishan Dairy plummeted from HK$2.81 to as low as 25 Hong Kong cents. The disclosure didn't say whether the selling was forced.

Huishan Dairy has no members on its audit committee after Song Kungang, Gu Ruixia, Tsui Kei Pang and Kan Yu Leung Peter resigned as independent non-executive directors. Huishan Dairy's chief financial officer Eddie So, the company's media representative and auditor KPMG LLP didn't immediately respond to e-mailed requests asking when the company will report its results for the year ended March 31.

An explainer on Huishan's 85 percent stock slump

The selloff came about three months after Carson Block, the short seller and founder of Muddy Waters LLC, issued a report on Huishan Dairy alleging the company was worth “close to zero.” Even so, the stock fluctuated in a narrow range between HK$2.69 and HK$3.23 from the start of October 2015 through to March 23. Huishan has said that the allegations in Block's December report were groundless and contained misrepresentations.

To contact the reporter on this story: Lisa Pham in Hong Kong at lpham14@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Richard Frost, Emma O'Brien