The Taiwan Stock Exchange has announced that margin trading and short selling of ABIT Computer's stock will be suspended as it carries out an investigation into the company's accounting practices.

 

Starting December 16, the stock exchange has downgraded ABIT's status to a full-delivery stock for an indefinite period of time. Full-delivery stock status requires investors to deposit the full amount needed to purchase desired shares in their accounts before an order can be placed.

 

Stock exchange officials have raised eight points of suspicion with ABIT concerning their financial records and operational practices. The stock exchange claims to have discovered irregularities in ABIT's business dealings and investments that may have violated stockholders' rights and increased risk for investors. ABIT's initial response to the eight points did not satisfy stock exchange officials, hence the decision to downgrade ABIT's stocks. Officials have threatened to de-list the motherboard maker if it does not resolve the issue within the next year. ABIT has promised to clear things up soon.

 

The exchange is demanding an explanation from ABIT regarding why 70% of its sales and procurements during the first half of the year were attributed to seven units that are registered under the same address in Hong Kong. Each of the seven units has a capitalization of only HK$2 (US$0.25). The exchange has also raised doubts about how it is possible that two firms set up with ABIT's units receivables could generate a goodwill value of US$3.2 billion. Allegations of insider trading are also starting to circulate around ABIT's issuance of a European convertible bond in 1992.