Earlier this month, Prescience Point Research Group released an extremely bearish report on Celadon Group, Inc. CGI 6.45% in which the firm alleged Celadon had inflated its reported tangible book value by more than 95 percent.

On Wednesday, Prescience released a follow-up report on Celadon after getting a response from the SEC to a Freedom of Information Act request Prescience made regarding Celedon.

“We have confirmed with staff that releasing the withheld information could reasonably be expected to interfere with ongoing enforcement proceedings,” the SEC general council’s letter read, seemingly confirming that Celadon is currently under investigation.

“CGI has used off-balance sheet entities (i.e. 19th Capital, JV with Element) and manipulative accounting practices to hide its insolvent condition from investors and creditors,” Prescience Point claimed in its original report.

After identifying what the firm alleges are inconsistencies in Celadon’s public financial filings, Prescience Point hired a third party forensic accounting firm too look into the company.

Prescience Point allegedly found evidence Celadon used a sham Daylight Loan with a JV partner, questionable auditing practices and an inflated 19th Capital shareholder redemption to inflate its perceived book value.

From this point forward, Prescience Point sees two possible paths for Celadon:

• The SEC and/or Celadon’s creditors call on the company to restate years of financial statements, which could include potential fines and even criminal prosecution.
• Celadon will run out of liquidity and file for bankruptcy.

“We hope…

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