Sound Global's Explanation for Cash Shortfall Doesn't Add Up - Market Talk

0201 GMT [Dow Jones] Sound Global's (0967.HK) explanation Wednesday for a 2 billion yuan cash shortfall identified by an auditor is "slightly disingenuous," say Trung Nguyen of Singapore-based Lucror Analytics. The discrepancy was highlighted in short-seller Emerson Analytics' February 2 report. Trading in Sound Global shares halted two weeks after the report and remain suspended. Sound Global says the money in question paid for deposits for acquisitions proposed last August and will be refunded once the purchases are completed. Thus, the firm didn't record the journal entry. It doesn't quite add up, Nguyen says. A refund would only be made if the transactions were canceled or if they were funded by shares instead of cash. "This explanation once again highlights Sound Global's poor corporate governance," Nguyen says. "There is too little transparency around the company where two large acquisitions, equivalent to half of enterprise value, were in progress without any public disclosure," Nguyen says. (dominique.fong@wsj.com; @dominiquefong)