Longtop's great growth seduced some of the biggest fund names.
Fidelity, Putnam, and Janus are among the asset managers apparently fooled by Longtop Financial Technologies
On May 23, Longtop said Deloitte Touche Tohmatsu resigned as auditor from Longtop. The company had posted terrific annual revenue growth, but in a letter the accounting firm says the company falsified its financials, including cash balances and possibly revenue, and that it can no longer rely on management's financial reporting. Moreover, it said, given recent findings, previous audited reports should not be trusted. Thus, whatever investors thought the company had been worth, in reality, its value could be much, much less, if anything.
The company had a mere $1.1 billion market cap when trading in its stock was halted at $18.93 a share on May 16. It would be hard for a large asset manager to buy shares in a firm with such a small market cap without the purchase being a large stake, but Fidelity had enough confidence in Longtop to hold about 14.5% of it as of March 31. It appears that Tom Allen, a Fidelity fund manager with a good track record, was the one who bit. Several of his funds, including Fidelity Advisor Global Capital Appreciation
Four Putnam funds, Putnam Voyager
Click here for the list of Longtop's major fund shareholders.