A failed IPO on the Hong Kong Stock Exchange has the makings of a fish tale.
China Tuna Industry Group Holdings, based in Dalian, China, has been one of the largest suppliers of premium tuna for Japan's sushi market. The company aimed to go public in September—with the help of Deutsche Bank—and put out a preliminary prospectus in August for investors with the hope of raising around $150 million.
But that prospectus was its downfall.
A close inspection by Greenpeace found that the company stated it was not in danger of being punished for fishing beyond international quotas. And the environmental group uncovered that China Tuna used outdated information on how much of a dwindling species of tuna were available to catch.
Now, the IPO is suspended, China Tuna is incommunicado, Deutsche Bank is declining comment and the Chinese government is on the defensive over fish management rules.
"The main problem was their use of older assessments on bigeye tuna," said Elsa Lee, senior business advisor at Greenpeace, who spoke to CNBC by phone from Hong Kong.
"The Pacific Ocean is overfished on bigeye and not recognizing that was a big omission on their (China Tuna) part," she said.
For investors interested in China, the incident comes as a warning even after the recent success of the IPO from China-based Alibaba.
"There was renewed confidence after Alibaba," said Greg Sichenzia, a founding partner of securities law firm Sichenzia Ross Friedman Ference.
"We saw it come back after the rash of inaccurate Chinese IPO statements a few years ago," Sichenzia said. "This is not to disparage China, but this is a wake-up call for investors."
Tuna over fished
It was after Greenpeace heard media reports about the coming China Tuna IPO that it dug into the prospectus, Lee said. Founded in 2000, China Tuna Holdings operates Chinese and Japanese fishing vessels and is actually registered in the Cayman Islands, according to reports.
(Attempts to reach China Tuna in China and the Cayman Islands by CNBC were unsuccessful.)
In the prospectus, China Tuna said it wanted to expand South Pacific tuna fishing.
China Tuna also asserted that it had exceeded international fishing quotas over the last four years and that "China has not been and will not, under any sanction system which may be adopted in the future, be subject to any penalties for such historical noncompliance."
The company also used information on the amount of bigeye tuna that was out of date.
According to Greenpeace, the data on tuna stock from 2011 cited by China Tuna, saying there was enough tuna in the ocean, were superseded by a more recent study that said the fish was at dangerously low levels and being overfished. And China Tuna should have known that, according to Greenpeace.
After digging through the prospectus, Greenpeace quickly fired off letters in September to the Hong Kong exchange and the Chinese government calling for the IPO to be delayed.
"We got a letter back from the exchange saying they were taking the matter seriously," Lee explained.
Greenpeace also got a reply from the Chinese government saying it found problems with the prospectus and ordered the company to pull out of the IPO, Lee said.
The letter also stated that Chinese officials said China Tuna's practices were "incompatible" with the country's conservation measures.
"We also tried to contact China Tuna but we were unsuccessful," Lee said.
In the end, without much fanfare Lee said, the IPO scheduled for Sept. 18 was suspended.
IPO could still happen
But the story is far from over.
China Tuna could try yet again for an IPO, with a revised prospectus.
That's spurred Greenpeace to send a letter to Deutsche Bank this month pointing out the problems it found in the current draft and urging the bank to "withdraw as sponsor of the CTI IPO" and to "Develop and implement a sustainable and socially just seafood industry policy across Deutsche Bank."
"We want financial institutions to be careful of supporting this kind of deal that uses the resources of our oceans," Lee said.
In an email reply to CNBC, a spokesperson for Deutsche Bank said its Hong Kong office declined to comment when asked about the previous prospectus and for its plans going forward.
Whether China Tuna's IPO goes through or not, there's a lesson for Chinese firms, said securities lawyer Sichenzia.
"There are still great companies coming out of China," said Sichenzia, who said his firm has been very active in the Chinese investing market."But I think they need to take a more Western approach when it comes to accounting, such as making sure the numbers are legit, " he said.