Sino-Forest plunges as halt lifted

Shares in Sino-Forest Corp. plunged in TSX trading Friday, despite its denial ofallegations by a U.S. financial analyst that it had wildly exaggerated its assets and fabricated sales transactions.

Shares in the Chinese-Canadian timber company, based in Mississauga, Ont., closed down64 per cent at $5.23on the Toronto Stock Exchange. Volume was41 million,26 times the average for a whole day of trading.

When trading washalted Thursday, the stockwas down $3.75 at $14.46.

Earlier Friday, the firm said it has appointed an independent committee of directors to investigate the allegations made by Muddy Waters Research.

Executives said they were confident the comments in the report would be disproven.

"It is important that our independent committee thoroughly address Muddy Waters' allegations, and they will have my full support and those of the management team in doing so," CEO Allen Chan said in a statement.

"However, let me say clearly that the allegations contained in this report are inaccurate and unfounded."

The company's shares were halted Thursday afterplunging more than 20 per cent following release of the analyst report which, among other things, called Sino-Forest's efforts to raise capital "a multibillion-dollar Ponzi scheme."

Sino-Forest noted that Muddy Waters held a short position in the company. A short position allows an investor to profit when a share falls in price.

"Muddy Waters' shock-jock approach is transparently self-interested and we look forward to providing our investors and other stakeholders with additional information to rebut these allegations," Chan said.