By Greg Hazley
China’s New Oriental Education and Technology Group, which is publicly traded in the U.S., is shoring up its PR defenses this week in the U.S. and abroad after getting tangled in reports of an SEC crackdown on Chinese auditors and an investment bank’s suggestion it might be a target.
Brunswick Group’s Beijing and New York offices are advising New Oriental and handing media amid the reports.
After the SEC said Dec. 3 that foreign units of five global accounting firms have been charged after refusing to cooperate with a probe into nine unnamed China-based, U.S.-traded companies, Wells Fargo said New Oriental Education, along with another U.S.-traded Chinese company, Ambow Education Holding, was at risk of delisting. Bloomberg News reported that Wells Fargo later updated its Dec. 4 report, saying it didn’t intend to imply New Oriental was the subject of the SEC probe and was speaking generally of Chinese stocks listed in the U.S.
After its shares fell on the Wells Fargo and SEC news, New Oriental initially said on Dec. 5 its policy was not to comment on unusual market activity. But hours later the company released a statement to “clarify” that even though its auditor, Deloitte Touch Tohmatsu, was one of five charged by the SEC in its probe, New Oriental was not the client referred to in SEC proceedings.
New Oriental’s ADRs, which trade on the New York Stock Exchange, were up two percent in morning trading to $17.74, with a 52-week range of $9.41-$29.19.
In addition to Deloitte, the auditors targeted by the SEC include affiliates of Ernst & Young, KPMG and PricewaterhouseCoopers, as well as BDO China Dahua Co.
"The fact that the action is being taken collectively against all of the four largest audit firms and one other firm demonstrates that this is a profession-wide issue, not unique to one firm," PWC said in a statement. "This action involves an issue that needs to be resolved between the U.S. and China regulators as it impacts all audit firms in China serving clients who are registered with the SEC." |