IQE shares plummet after Muddy Waters says it’s shorting its shares

(Reuters) – Shares of British semiconductor materials maker IQE IQEwhose technology is used by Apple Inc. AAPL.O Shares of the iPhone fell nearly 19% after Muddy Waters Capital LLC said it was shorting the company.

The short-seller said IQE was a “serious accounting manipulator” and it was justified to cut its first-half 2017 net profit by around £5m, or 69%, to account for possible “aggressive capitalization of expenses”.

And the company’s 2015 net profit was lowered by 58.5%, and the 2016 net profit was lowered by 25.4%.

Muddy Waters said the deal between IQE and Cardiff University’s joint venture CSC was “not substantive and the accounting treatment may have been designed to deceive investors”. (bit.ly/2FYEtBf)

IQE responded that the information in the report was either factually inaccurate or had previously been disclosed in the company’s annual report and financial statements.

The Muddy Waters report came a week after ShadowFall, a hedge fund management firm that shorted IQE, issued a report saying it was concerned about two joint ventures between IQE and universities in Wales and Singapore. Together, these joint ventures accounted for a third of IQE’s revenue in 2015 and 2016, it added.

IQE dismissed ShadowFall’s report as “baseless” and “misleading in its analysis of the company’s financial position”.

The company also said at the time that it expected full-year revenue to continue to beat market expectations.

The company’s shares were down 10 percent at 101.4 pence by 1629 GMT, making it among the top 10 losers on the London Stock Exchange. .PL.L.