MSPEA-backed Tianhe drops on resumption of trading

Having been suspended since September 2 when Anonymous Analytics, a faction of international activist and hacker network Anonymous, claimed Tianhe made false statements in its IPO prospectus, the stock dropped as low as HK$1.22 before ending the morning session on Thursday at HK$1.31. The company's market capitalization has fallen by approximately HK$24 billion.

Tianhe announced that revenue came to RMB1.86 billion ($303 million) for the three months ended September 2014, up 36.7% year-on-year, while gross profit climbed 44.3% to RMB1.22 billion.

The company also published a new 55-page rebuttal of the Anonymous Analytics claims. In it, Tianhe reiterates the assertion that Anonymous Analytics "twists facts and intertwines fictions," including the use of falsified information and forging the Tianhe chairman's signature, and criticizes the group for concealing itself "behind a shroud of anonymity with no information on its identity or background."

In addition, the rebuttal stresses that Tianhe does not, as alleged, keep two sets of books, and that income tax filings are up to date and the Chinese authorities have confirmed receipt of all monies owed. Responding to accusations of non-existent customers and exaggerating the potential size of the market, Tianhe offers evidence to the contrary and provides more detail on how its industry operates.

Anonymous Analytics issued a response claiming that Tianhe has yet to properly address questions raised about its tax payments, profitability, customer relationships and industry size.

Founded in 1992, Tianhe is China's largest manufacturer of lubricant oil additives that perform functions including friction reduction, cleansing and heat dissipation in motor oil and other lubricants. It also supplies specialty fluorochemicals - commonly used in waterproofing and solvents - to customers around the world.

MSPEA committed $300 million to the company in 2012 - its largest investment to date - and held a 9.35% stake ahead of the Hong Kong IPO. Following the offering, which saw Tianhe raise $658 million, it held 8.6%. Last month MSPEA said it fully supported the company's management team.

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• Morgan Stanley Private Equity Asia
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