Timminco Limited (TSE: TIM) shares fell sharply earlier this week after the company reported lower-than-expected sales and made some questionable statements to investors. Short-seller Asensio has been making a bear case on the stock for some time, and it now appears like many of their predictions are coming true. Shares fell sharply after the news hit the market.

Timminco's 221 million tons of solar silicon shipped fell short of expectations due to contamination issues previously brought up by Asensio's research and denied by CEO Heinz Schimmelbusch in a May 30th article that appeared in the Globe and Mail. Earlier this week, the company elected to hold back 70 tonnes of silicon due to higher-than-expected phosphorous levels.

Asensio's issues with Timminco deals with its accounting for returns in sales recognition. A report on July 22nd issued by the short-seller questioned statements made by company officials that Timminco's customers were declining to return even highly contaminated parts of ingots for "extra credit offered by Timminco".

The big question going forward is whether or not the average selling price would decline due to returned material. CFO Rober Dietrich reiterated that there were no returns in the quarter, but did not shed any light on statements made by other executives mentioned above. As a result, Asensio believes there exists a possiblity of fraud within the high-flying company.