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Citron Research Accusing China Borun Corp. Of Fraud (BORN)

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Citron Research has released a research report which levels some fairly substantial accusations at China New Borun Corp. (NASDAQ: BORN). The report states that "Last month Citron exposed potential disclosure problems with China New Borun Corporation, a corn alcohol manufacturer, whose reports of tremendous profits boast far-above-average margins in a heavily commoditized and competitive industry." The firm is questioning the legitimacy of these profits, saying the company is using "an antiquated and largely unprofitable manufacturing process."

Even more damning, Citron says that their research suggests that BORN is sitting on undisclosed debt to the tune of $270 million RMB "as reflected in tax filings that predate its May IPO." This liability would offset nearly all of the company's retained earnings according to Citron. Furthermore, since these revelations have surfaced there have apparently been defections from the Board of Directors.

The firm concluded their report by saying that "It is the opinion of Citron that BORN is committing fraud on the marketplace."

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