Paulson Timber Bet Falls Further After Broadsheet Broadside

Jun 20 2011 | 12:02pm ET

Paulson & Co.'s investment in Chinese timber company Sino-Forest Corp. piled up fresh paper losses after a newspaper backed one claim made by a hedge fund that is shorting the company.

Canada's Globe & Mail reported on Saturday that Sino-Forest had overstated its holdings in China's Yunnan Province. According to the newspaper, there are "inconsistencies," and one plantation that Sino-Forest owns the right to is smaller than the 494,000 acres Sino-Forest claims.

The Globe cited a provincial forestry official and the chairman of a company that sold some of the Yunnan land to Sino-Forest.

The report sent Sino-Forest shares in Toronto swooning once more—the company's stock had bounced back some after it issued a vigorous rebuttal of the research report by Muddy Waters that first sent it into a tailspin. Shares are down 13% today and 85% since the Muddy Waters report, leaving Paulson with losses in excess of US$500 million.

In a statement, Sino-Forest denied the Globe's allegations, calling the newspaper's article an "incorrect portrayal of its business" containing "factual misunderstandings regarding the company's ownership of trees in Yunnan."


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