Shares in Huishan Dairy Holdings, China’s biggest dairy company, plunged downward by 85% on Friday wiping close to $4 billion from its market value, according to Reuters.

Trading on its shares, on the Hong Kong Stock Exchange, was suspended – the second such occurrence in three months.

There were reported allegations that the company’s largest shareholder misappropriated 3bn yuan (over €400m) to invest in real estate. This has been denied by Chairman Kai.

News website Barron’s quoted Huishan Dairy Chairman, Yang Kai, as saying that the fall resulted from an ‘attack’ by a short seller.

At the end of last year, US-based short seller Muddy Waters questioned Huishan Dairy Holdings’ profits. It said that the company had inflated spending on its cattle farms to “artificially raise capital expenditure figures”.

At that time, Muddy Waters said the Chinese dairy firm was worth “close to zero”.

This was based on an alleged “misrepresentation” with regard to its self-sufficiency – in its use of alfalfa as feed for its cattle. Muddy Waters also said that Huishan Dairy Holdings was “over-leveraged”.

Huishan Dairy Holdings responded by saying the allegations were baseless.

Who or what is Huishan Dairy Holdings?

Huishan Dairy Holdings is principally engaged in the production and sales of raw milk, liquid milk products and milk powder products.

The business is split into three divisions. The Dairy Farming division is engaged in planting, growing and harvesting alfalfa grass and other feed crops, processing feeds and breeding dairy cows.

The Liquid Milk Production division is engaged in the production and sales of pasteurized milk, ultra-high temperature (UHT) milk, yoghurt and milk beverages. Lastly, the Milk Powders Production division is engaged in the production and sales of infant milk formula products, adult milk powder products and dairy ingredient products.

The company operates 82 farms in Liaoning province. It went public in 2013 in a $1.3 billion initial public offering, with global investment banks Deutsche Bank, Goldman Sachs, HSBC and UBS acting as sponsors of the listing.