Huazhu Group Limited
|Company Name||Huazhu Group Limited|
On September 21, 2020, Bonitas Research issued a report, alleging, among other things, that Huazhu Group “lied about the ownership of its hotel portfolio to produce fake financials.” The report also stated that Bonitas’ “fieldwork” “confirmed that Huazhu secretly supported operating costs of franchisee hotels owned by undisclosed current Huazhu employees & other undisclosed related parties (‘off-book hotels’).” Bonitas further alleged that undisclosed related party transactions were used “to artificially inflate Huazhu’s reported profits[,]” and that it “calculate[s] that Huazhu’s fake profits manifested as RMB 2 billion (US$ 300 million) of fake PP&E on its CYE’19 balance sheet.”
On this news, Huazhu Group’s American depositary share (“ADS”) price fell $1.54, or over 3%, to close at $40.48 per share on September 21, 2020, thereby injuring investors.
Then, on September 25, 2020, Huazhu announced that a special committee of its Board of Directors will investigate the allegations in the Bonitas report.
On this news, the Company’s share price fell sharply in intraday trading on September 25, 2020.
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