Question

Can I get the answers to the Longtop Financial Technologies Limited Case?

Answer 1

Longtop Financial Technologies Case Study

Accounting fraud in China

Longtop Financial Technologies (NYSE:LFT) is a software developer and technology services provider based in Xiamen. It provides technology services and creates both standardized and custom-designed software for banks in China, including three of the four largest state-controlled banks: China Construction Bank, Agricultural Bank of China, and Bank of China. LFT went public on the New York Stock Exchange on October 23, 2007. The company sold 10.4 million American depositary shares for $17.50 per share, raising $182 million in proceeds. By days end, the stock had jumped to $32.40 per share. Goldman Sachs and Deutsche Bank led the IPO and Deloitte Touche Tohmatsu served as auditors. Morgan Stanley was the lead manager in a 2009 offering of more shares. In November 2010, LFT’s market capitalization peaked at $2.4 billion. In a few short months, that value would be nearly wiped out. On April 26, 2011 Andrew Left of Citron Research published a report on his website accusing LFT of widespread fraud. Left had helped to uncover fraud at China Media Express (NASDAQ:CCME) just the month before so his report gathered considerable attention. Citron is a short-selling research firm, which takes a short position in target companies before disclosing damaging research. Citron and other short selling research firms played a key, yet highly controversial role in the demise of many China concept stocks.