ChinaCast Education Corp. earlier this week suggested that it may not follow up on its planned $50 million share repurchase program and would hire an independent audit firm to look into its cash balances.
Ron Chan, CEO of ChinaCast, said in a letter that the actual cost of the repurchase program would be around $75 million because of a Chinese tax levied on distribution of profit in the U.S. Chan also said in the letter that regulators in China have shown serious concerns about the company’s plans to take the full $50 million out of China.
Following the development, ChinaCast shares fell more than 30% on Monday. Trading in ChinaCast shares was halted by the exchange after market close on Monday. The company, meanwhile, clarified the issue relating to the shareholder letter on Tuesday.
ChinaCast said that its auditors have not raised any concern regarding the company’s cash position. The company said that it is engaging a third party service provider on voluntary and proactive basis to conduct an independent confirmation. The company said that it is taking the step following several incidents where Chinese companies trading on U.S. exchanges have been unable to properly confirm cash balances. The company expects the move to provide greater comfort to the marketplace on the issue at the time when Chinese operating companies are under the scanner.
ChinaCast shares are rebounding in today’s trading. At last check, the stock was trading 22.67% higher at $3.03.
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