tag:blogger.com,1999:blog-61540151414844516052024-03-19T08:46:56.025+00:00The Trading DayThe Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.comBlogger128125tag:blogger.com,1999:blog-6154015141484451605.post-71834961000942457462012-10-14T15:08:00.000+01:002012-10-14T15:08:23.519+01:00Chinese Companies "Going Dark"After two years of turmoil in the market for China-based small cap stocks most of the companies find themselves in a dire situation. Their stock price has collapsed and the company's market value is only a fraction of what it was before RINO's demise. The trading volume for most stocks has collapsed as well and there is almost no chance to raise capital anymore. At the same time the cost of being a public company has risen significantly, and probably will continue to rise from current levels. <b>That leaves very many Chinese companies unhappy with their public status</b> as the costs by far outweigh the benefits and many U.S.-traded firms no longer wish to be a public company.<br /><br />Most of the expenses of being a public company arise from the reporting requirements with the SEC. The manadatory Form 10-K (annually) requires that the company's financial results are audited by an independent accounting firm, additionally the quarterly Form 10-Q's have to be reviewed by this auditor. Those forms also trigger legal fees, technical expenses as formatting them for the EDGAR system, and the company has to pay professional staff, training them in U.S. GAAP accounting and Sarbanes-Oxley compliance. Last but not least a Chief Financial Officer is usually required, a senior management position most small companies would not fill if they weren't publicly traded.<br /><br /> <b>Auditing costs have risen significantly over the past three years</b> as the market turmoil and increased scrutiny led to an increased risk of auditing a Chinese company for most accounting firms.<br /><br /><img src="http://www.fixyou.co.uk/images/20121014.png" width="600" height="160" border="0"><br /><br /> Other expenses arising from a company's public status are compensation for independent directors, spending more capital on investor relations in an effort to distinguish itself from other Chinese companies in such a hostile environment, and increasingly also legal costs to defend the company against short seller allegations and class action suits. After years of trouble and only small benefits from their public status many companies now simply wish to reduce these costs by giving up on their public status, ceasing to be a fully reporting company.<br /><br />We have seen many "Going Private" transactions or proposals over the past twelve months - more on this in one of the next articles in this series - but not every small company can raise the capital necessary to repurchase their stock from its public shareholders. That leaves most companies who wish to stop being a public company only one option: to stop filing quarterly and annual reports with the SEC, also known as "Going Dark," without buying back its shares.<br /><br /><b>Form 15</b><br /><br />There are basically two ways of "Going Dark," the orderly and legal way of deregistering its shares by filing a Form-15 with the SEC, and the illegal way of simply disappearing from the public eye. However, not every company is allowed to file a Form-15 and the SEC has to accept the filing for it to become effective. The main requirement for a Form-15 is that the company has less than 300 shareholders of record, or less than 500 shareholders and its net assets for each of the last three fiscal years was less than $10 million. Additionally, with very few exceptions, the SEC requires that the company is current with its reporting obligations at the time of a Form-15 submission.<br /><br />Here is a list of Chinese companies that were "Going Dark" by filing a Form-15:<br /><br /> 2012-10-04 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CHME">CHME</a> China Medicine<br /> 2012-08-31 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CCGY">CCGY</a> China Clean Energy<br /> 2012-08-13 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=ZSTN">ZSTN</a> ZST Digital Networks<br /> 2012-06-29 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=AGSO">AGSO</a> AgriSolar Solutions<br /> 2012-05-11 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=LTUS">LTUS</a> Lotus Pharmaceuticals<br /> 2012-04-20 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=ONBI">ONBI</a> One Bio Corp<br /> 2012-03-30 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=ALIF">ALIF</a> Artificial Life<br /> 2012-03-30 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=EESC">EESC</a> Eastern Environment Solutions<br /> 2012-03-29 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CSNH">CSNH</a> China Shandong Industries<br /> 2012-03-13 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=XNYH">XNYH</a> Xinyinhai Technology<br /> 2012-02-09 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CNER">CNER</a> China New Energy Group<br /> 2012-02-08 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=SGLA">SGLA</a> Sino Green Land<br /> 2011-12-30 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=DFEL">DFEL</a> China TMK Battery Systems<br /> 2011-11-14 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=SRRY">SRRY</a> Sancon Resources Recovery<br /> 2011-10-20 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CIWT">CIWT</a> China Industrial Waste Management<br /> 2011-06-20 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CRJI">CRJI</a> China Runji Cement<br /> 2011-05-18 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=GHNA">GHNA</a> GHN Agrispan Holding<br /> 2011-01-13 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=RINO">RINO</a> RINO International<br /> 2011-01-03 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=ENHD">ENHD</a> Energroup Holdings<br /><br /> Those stocks are still quoted on the pink sheets, and the companies still have certain responsibilities to its public shareholders as they didn't buy back its stock. This includes maintaining a board of directors and holding annual shareholder meetings. If these "Form-15 Companies" wish to regain compliance in the future the SEC has the following regulation in place: "If the certification of termination on Form 15 is subsequently withdrawn or denied, the company must file all reports that would have been required if the Form 15 had not been filed."<br /><br /><b>Going Dark</b><br /><br />It is much harder, if not impossible, to reactivate its stock in the future if the company has chosen to "go dark" illegally. Simply ignoring its reporting obligations might cause the SEC to take action, which might lead to its stock to become untradeable, even on the pink sheets. Still, the reasons for "going dark" might be the same as for "Form-15 Companies," it doesn't necessarily indicate fraud or criminal behaviour. Investors holding any of these stocks are encouraged to independently and persistently contact the company and find out as many of its reasons and future plans as possible. <br /><br />There are many more Chinese small- and micro caps that are still traded on the OTC but face similar problems than those that were "going dark." Another group of possible "going dark" candidates can be found in the large number of companies that have seen their stock getting delisted from a senior exchange with little or no chance of regaining that listing. It pays off to take a close look at the filing history of these names and look out for possible warning signs.<br /><br />Here is a comprehensive list of China-based companies that were "going dark" without filing a Form 15:<br /><br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=AKRK">AKRK</a> -- Asia Cork</b><br /> (Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-97.95%</span>)<br /> 2011-05-23 -- Last SEC Filing<br /> 2011-05-23 -- Last Quarterly/Annual Report: Q1/FY2011 ended March 31, 2011<br /><br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=BEER">BEER</a> -- Tsingyuan Brewery</b><br /> (Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-95.10%</span>)<br /> 2012-04-02 -- Last SEC Filing<br /> 2012-02-10 -- Going Private Transaction indicated (loose plans)<br /> 2011-11-18 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011<br /><br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=BFAR">BFAR</a> -- BioPharm Asia</b><br /> (Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-98.62%</span>)<br /> 2011-06-24 -- Last SEC Filing<br /> 2011-02-16 -- CEO Appointment<br /> 2011-02-15 -- CEO Resignation<br /> 2011-02-14 -- Auditor Engagement<br /> 2011-01-30 -- CFO Appointment<br /> 2011-01-27 -- CFO Resignation<br /> 2011-01-20 -- Auditor Terminated<br /> 2010-11-22 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010<br /><br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGM">CAGM</a> -- China Green Material</b><br /> (Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-98.10%</span>)<br /> 2012-04-02 -- Last SEC Filing<br /> 2012-03-27 -- Auditor Resignation<br /> 2011-11-21 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011<br /> 2011-07-13 -- Auditor Change<br /> 2011-04-27 -- Auditor Change<br /><br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CGDI</a> -- China Growth Development</b><br /> (Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-95.84%</span>)<br /> 2010-03-31 -- Last SEC Filing<br /> 2009-11-18 -- Last Quarterly/Annual Report: Q3/FY2009 ended September 30, 2009<br /><br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CGPI</a> -- China Redstone Group</b><br /> (Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.54%</span>)<br /> 2011-07-01 -- Last SEC Filing<br /> 2011-05-13 -- CFO Appointment<br /> 2011-04-22 -- CFO Resignation<br /> 2011-03-02 -- CFO Appointment<br /> 2011-03-02 -- CFO Resignation<br /> 2011-02-14 -- Last Quarterly/Annual Report: Q3/FY2011 ended December 31, 2010<br /> <br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CHBU</a> -- China Agri-Business</b><br /> (Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-95.62%</span>)<br /> 2012-03-30 -- Last SEC Filing<br /> 2011-11-21 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011<br /> <br /> <b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CHNC</a> -- China Infrastructure Construction</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-96.88%</span>) <br />2012-04-20 -- Last SEC Filing <br />2012-04-20 -- Last Quarterly/Annual Report: Q3/FY2012 ended February 29, 2012 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CKGT">CKGT</a> -- China Kangtai Cactus</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-75.73%</span>) <br />2012-08-15 -- Last SEC Filing <br />2011-11-14 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNOA">CNOA</a> -- China Organic Agriculture</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-96.98%</span>) <br />2011-05-17 -- Last SEC Filing <br />2011-03-18 -- CFO Resignation <br />2011-03-18 -- CEO Resignation <br />2011-01-24 -- Auditor Engagement <br />2011-01-20 -- Auditor Resignation <br />2010-12-21 -- CFO Appointment <br />2010-12-21 -- CFO Resignation <br />2010-11-22 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNPI">CNPI</a> -- China Power Technology</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: n/a) <br />2011-08-09 -- Last SEC Filing <br />2011-06-10 -- CFO Resignation <br />2011-05-16 -- Last Quarterly/Annual Report: Q1/FY2011 ended March 31, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNVP">CNVP</a> -- China Environmental Protection</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.56%</span>) <br />2012-09-24 -- Last SEC Filing <br />2011-08-11 -- Auditor Engagement <br />2011-01-21 -- Auditor Resignation <br />2010-08-23 -- Last Quarterly/Annual Report: Q3/FY2010 ended June 30, 2010 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CRUI">CRUI</a> -- China RuiTai International</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-97.00%</span>) <br />2012-03-30 -- Last SEC Filing <br />2011-11-14 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CSGH">CSGH</a> -- China Sun Group High-Tech</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-91.23%</span>) <br />2012-06-25 -- Last SEC Filing <br />2012-06-19 -- CFO Resignation <br />2012-04-13 -- Last Quarterly/Annual Report: Q3/FY2012 ended February 29, 2012 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CSGJ">CSGJ</a> -- China Shuangji Cement</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-87.95%</span>) <br />2011-03-31 -- Last SEC Filing <br />2010-11-22 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CSOL">CSOL</a> -- China Solar & Clean Energy</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-97.06%</span>) <br />2012-08-09 -- Last SEC Filing <br />2012-08-06 -- CFO Resignation <br />2011-11-21 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=EMDY">EMDY</a> -- Emerald Dairy</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-90.57%</span>) <br />2011-12-01 -- Last SEC Filing <br />2011-10-26 -- Last Quarterly/Annual Report: Q2/FY2011 ended June 30, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=GCHT">GCHT</a> -- GC China Turbine</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-95.38%</span>) <br />2012-08-15 -- Last SEC Filing <br />2012-02-22 -- CFO Resignation <br />2011-11-21 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br />2011-09-21 -- Auditor Change <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=GHII">GHII</a> -- Gold Horse International</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-93.36%</span>) <br />2012-06-30 -- CFO Contract expired <br />2012-05-16 -- Last SEC Filing <br />2012-05-10 -- Last Quarterly/Annual Report: Q3/FY2012 ended March 31, 2012 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=HFGB">HFGB</a> -- Huifeng Bio-Pharma</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-94.12%</span>) <br />2011-08-12 -- Last SEC Filing <br />2011-08-09 -- Auditor Engagement <br />2011-04-15 -- Auditor Resignation <br />2010-11-15 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=HSYT">HSYT</a> -- Home System Group</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-97.16%</span>) <br />2012-04-02 -- Last SEC Filing <br />2012-03-08 -- Auditor Engagement <br />2011-12-13 -- Auditor Resignation <br />2010-11-15 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=IDCX">IDCX</a> -- North China Horticulture</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.34%</span>) <br />2012-04-02 -- Last SEC Filing <br />2011-11-21 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=JADA">JADA</a> -- Jade Art Group</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-89.45%</span>) <br />2010-11-16 -- Last SEC Filing <br />2010-11-15 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=LEGE">LEGE</a> -- Legend Media</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-50.00%</span>) <br />2010-09-28 -- Last SEC Filing <br />2010-05-17 -- Last Quarterly/Annual Report: Q3/FY2010 ended March 31, 2010 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=LZEN">LZEN</a> -- Lizhan Environmental</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-91.74%</span>) <br />2012-04-24 -- Last SEC Filing <br />2012-04-12 -- Last Quarterly/Annual Report: FY2011 ended December 31, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=PFGY">PFGY</a> -- Perfectenergy International</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-96.25%</span>) <br />2012-08-01 -- Last SEC Filing <br />2012-04-01 -- CFO Resignation <br />2011-08-22 -- Last Quarterly/Annual Report: Q3/FY2011 ended June 30, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=RDBO">RDBO</a> -- Rodobo International</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-91.94%</span>) <br />2011-12-30 -- Last SEC Filing <br />2011-08-15 -- Last Quarterly/Annual Report: Q3/FY2011 ended June 30, 2011 <br /> <br /><b><a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">YYINE</a> -- Yayi International</b> <br />(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-77.28%</span>) <br />2012-08-15 -- Last SEC Filing <br />2012-04-13 -- CFO Resignation <br />2012-02-14 -- Last Quarterly/Annual Report: Q3/FY2012 ended December 31, 2011The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com18tag:blogger.com,1999:blog-6154015141484451605.post-56953468375025660742012-09-30T21:09:00.000+01:002012-09-30T21:09:59.101+01:00Chinese Delistings on U.S. ExchangesThe singlemost important goal for every Chinese company that decided to become publicly traded in the U.S. was to obtain a listing on a senior exchange, NASDAQ or NYSE / NYSE Amex. The reason that many companies chose a reverse merger as their method of going public was that it was much faster and significantly cheaper than a traditional IPO. And many of those reverse merger companies succeeded in getting their stock listed on a senior exchange within a few years.<br /><br />This listing comes with a number of benefits. First of all it is much cheaper to raise capital when the stock is no longer just quoted on the bulletin boards. And raising capital is a primary reason for going public also for Chinese companies. Secondly this listing creates a liquid market outside of the PRC for Chinese shareholders, and in China money, personal wealth, and with it status is of prime importance, not comparable with Europe or the U.S.<br /><br />That leads to the third, and probably most important reason for going public in the U.S.: recognition and prestige for the company and its officials. Being a U.S. public company with a NASDAQ or NYSE listing leads to prestige with both customers and suppliers, but also local banks and government. The good will of especially banks and local government officials is extremely important for a small Chinese company. In a country where success in business is largely based on networking and guanxi, status and prestige are invaluable assets for a young company.<br /><br />But it also means that a delisting notice from NASDAQ or NYSE comes with great embarrassment for the company. In most cases not only the stock price will collapse, but the repercussions for the company's business in China could be severe if it loses that good will from banks and influential officials in the local government administrations. <b>A Chinese company with a delisting notice will always pull all strings possible to maintain their senior exchange listing</b>, not for the best of its foreign shareholders but for their very own survival.<br /><br />There is no such thing as a "voluntary delisting" from a Chinese company. If you read such a phrase, stay away from the stock. A company that had its stock delisted without much of a fight is either a fraud or it has given up on its public status, in both cases you don't want to touch the stock.<br /><br />We have seen more than 50 Chinese delistings over the past two years, and with very few exceptions all those companies were frauds or they have now stopped filing reports with the SEC for other reasons. Only the handful of companies that stayed current in filing its Form 10Qs and 10Ks <i>at all times</i> since the delisting are worth a second look.<br /><br /><b>Chinese Delistings from NYSE/NASDAQ:</b><br /><br /> 2012-09-25 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=SCEI">SCEI</a> Sino Clean Energy -- Delisting from NASDAQ<br /> 2012-09-21 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CVVT">CVVT</a> China Valves Technology -- Delisting from NASDAQ<br /> 2012-09-07 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=BEST">BEST</a> Shiner International -- Delisting from NASDAQ<br /> 2012-07-11 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CDII">CDII</a> China Direct Industries -- Delisting from NASDAQ<br /> 2012-06-25 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CAST">CAST</a> ChinaCast Education -- Delisting from NASDAQ<br /> 2012-06-21 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CNEP">CNEP</a> China North East Petroleum -- Delisting from NYSE Amex<br /> 2012-06-15 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=XINGF">XINGF</a> Qiao Xing Universal Resources -- Delisting from NASDAQ<br /> 2012-06-15 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=WUHN">WUHN</a> Wuhan General Group -- Delisting from NASDAQ<br /> 2012-06-15 -- QXMCF Qiao Xing Mobile Communication -- Delisting from NASDAQ<br /> 2012-06-15 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CNGL">CNGL</a> China Nutrifruit -- Delisting from NYSE Amex<br /> 2012-05-29 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=AOBI">AOBI</a> American Oriental Bioengineering -- Delisting from NYSE Amex<br /> 2012-05-10 -- CKUN China Shenghuo Pharmaceutical-- Delisting from NYSE Amex<br /> 2012-05-08 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=UTRA">UTRA</a> Universal Travel Group -- Delisting from NYSE<br /> 2012-04-26 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=ZSTN">ZSTN</a> ZST Digital Networks -- Delisting from NASDAQ<br /> 2012-03-08 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CSKI">CSKI</a> China Sky One Medical -- Delisting from NASDAQ<br /> 2012-03-08 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CHNG">CHNG</a> China Natural Gas -- Delisting from NASDAQ<br /> 2012-02-10 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=FEED">FEED</a> Agfeed Industries -- Delisting from NASDAQ<br /> 2012-01-26 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=DGWIY">DGWIY</a> Duoyuan Global Water -- Delisting from NYSE<br /> 2011-12-29 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CEAI">CEAI</a> China Education Alliance -- Delisting from NYSE Amex<br /> 2011-11-30 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=ABAT">ABAT</a> Advanced Battery Technology -- Delisting from NASDAQ<br /> 2011-11-18 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CIIC">CIIC</a> China Infrastructure Investment -- Delisting from NASDAQ<br /> 2011-10-21 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=ORSX">ORSX</a> Orsus Xelent Technologies -- Delisting from NYSE Amex<br /> 2011-10-19 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CTESY">CTESY</a> SinoTech Energy -- Delisting from NASDAQ<br /> 2011-10-17 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CCDM">CCDM</a> China Century Dragon Media -- Delisting from NYSE Amex<br /> 2011-10-07 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=KEYP">KEYP</a> Keyuan Petrochemicals -- Delisting from NASDAQ<br /> 2011-10-04 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=AUTCF">AUTCF</a> AutoChina International -- Delisting from NASDAQ<br /> 2011-09-26 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=APWR">APWR</a> A-Power Energy -- Delisting from NASDAQ<br /> 2011-09-12 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">WATG</a> Wonder Auto Technology -- Delisting from NASDAQ<br /> 2011-09-02 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=PUDA">PUDA</a> Puda Coal -- Delisting from NYSE Amex<br /> 2011-08-17 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=LGFTY">LGFTY</a> Longtop Financial -- Delisting from NYSE<br /> 2011-08-04 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=JGBO">JGBO</a> Jiangbo Pharmaceuticals -- Delisting from NASDAQ<br /> 2011-07-21 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=YUII">YUII</a> Yuhe International -- Delisting from NASDAQ<br /> 2011-07-12 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=HQSM">HQSM</a> HQ Sustainable Maritime -- Delisting from NYSE Amex<br /> 2011-07-05 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CHBT">CHBT</a> China-Biotics -- Delisting from NASDAQ<br /> 2011-06-24 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=SBAY">SBAY</a> Subaye -- Delisting from NASDAQ<br /> 2011-06-24 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=NIVS">NIVS</a> NIVS IntelliMedia Technology -- Delisting from NYSE Amex<br /> 2011-06-24 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CRTP">CRTP</a> China Ritar Power -- Delisting from NASDAQ<br /> 2011-06-15 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CBEH">CBEH</a> China Integrated Energy -- Delisting from NASDAQ<br /> 2011-06-14 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CILE">CILE</a> China Intelligent Lighting -- Delisting from NYSE Amex<br /> 2011-06-14 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CELM">CELM</a> China Electric Motors -- Delisting from NYSE Amex<br /> 2011-05-20 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CAGC</a> China Agritech -- Delisting from NASDAQ<br /> 2011-05-19 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=CCME">CCME</a> China MediaExpress -- Delisting from NASDAQ<br /> 2011-04-13 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=DYNP">DYNP</a> Duoyuan Printing -- Delisting from NYSE<br /> 2011-03-29 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=FUQI">FUQI</a> Fuqi International -- Delisting from NASDAQ<br /> 2010-12-08 -- <a href="http://www.fixyou.co.uk/tracker_details.php?s=RINO">RINO</a> RINO International -- Delisting from NASDAQ<br /><br /> We have identified 24 additional Chinese companies that have already received a delisting notice from their exchange or will likely get such a letter in the near future. Those companies will have their common stock delisted within the next six months unless they take immediate action, usually a reverse stock split (approved by the exchange) will do the trick of getting their stock price above the crucial one dollar level.<br /><br />Some companies have already completed a reverse split, including <b>Cleantech Solutions International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CLNT">CLNT</a>, 1:10 Reverse Split on 2012-03-06), <b>China Precision Steel</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CPSL">CPSL</a>, 1:12 Reverse Split on 2012-08-28), and <b>China Information Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CNIT">CNIT</a>, 1:2 Reverse Split on 2012-03-02). Even though the stock price usually suffers even more after a reverse split, this is actually a good sign as the company decided not to give up on its senior exchange listing. Again, any Chinese stock that was delisted for violating the $1 minimum bid price rule without the company fiercly fighting for its survival on NASDAQ or NYSE should be avoided no matter what.<br /><br /><b>Chinese Stocks Facing Delisting:</b><br /><br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=BWOW">BWOW</a> Wowjoint Holdings<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on October 29, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CADC">CADC</a> China Advanced Construction Materials<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 19, 2013)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CALI">CALI</a> China Auto Logistics<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on January 28, 2013)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CBAK">CBAK</a> China BAK Battery<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 21, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CJJD">CJJD</a> China Jo-Jo Drugstores<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 27, 2013)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CNET">CNET</a> ChinaNet Online<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 26, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CNYD">CNYD</a> China Yida Holding<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 31, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CPGI">CPGI</a> China Shengda Packaging<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 5, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=DEER">DEER</a> Deer Consumer Products <br /> -- Trading Halted since 2012-08-13<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=DQ">DQ</a> Daqo New Energy<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 20, 2013. Reverse Split likely.)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=GPRC">GPRC</a> Guanwei Recycling<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on January 7, 2013)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=HEAT">HEAT</a> SmartHeat <br /> -- Trading Halted since 2012-05-30<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=HGSH">HGSH</a> China HGS Real Estate<br /> -- Minimum $1 Bid Price Rule Violation (NASDAQ Delisting Notice served on January 18, 2012, status unclear)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=KONE">KONE</a> Kingtone Wirelessinfo Solution<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 17, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=LZEN">LZEN</a> Lizhan Environmental<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on October 8, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=MCOX">MCOX</a> Mecox Lane<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 4, 2013. Reverse Split intention announced.)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=NFEC">NFEC</a> NF Energy Savings<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 26, 2013)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=QKLS">QKLS</a> QKL Stores<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on March 4, 2013)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=SIHI">SIHI</a> SinoHub<br /> -- Trading Halted since 2012-09-07 (Delisting certain)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=SUTR">SUTR</a> Sutor Technology<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 24, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=THTI">THTI</a> THT Heat Transfer Tech<br /> -- Trading below Minimum $1 Bid Price since September 10, 2012<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=VALV">VALV</a> Shengkai Innovations<br /> -- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 31, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=VISN">VISN</a> VisionChina Media<br /> -- Trading below Minimum $1 Bid Price since June 6, 2012<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=ZOOM">ZOOM</a> Zoom Technologies<br /> -- Trading below Minimum $1 Bid Price since August 31, 2012<br /><br />NYSE Amex does not have a $1 Minimum Bid Price Rule, yet their regulations state that they can delist a stock when "the aggregate market value of the security has become so reduced as to make further dealings on the Exchange inadvisable." It should also be noted that NYSE Amex recently amended its listing regulations to include several paragraphs about reverse merger companies which now have increased initial listing requirements. Given the large number of Chinese RTO blow-ups on NYSE Amex over the last two years we see the following eight Chinese small caps at risk duet to their low stock price:<br /><br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=AXN">AXN</a> -- Aoxing Pharmaceuticals (Day Close below $1.00 since July 18, 2011)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CBP">CBP</a> -- China Botanic Pharmaceutical (Day Close below $1.00 since November 11, 2011)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CHGS">CHGS</a> -- China Gengsheng Minerals (Day Close below $1.00 since February 14, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CNAM">CNAM</a> -- China Armco Metals (Day Close below $1.00 since August 17, 2011)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=CPHI">CPHI</a> -- China Pharma Holdings (Day Close below $1.00 since September 29, 2011)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=NEWN">NEWN</a> -- New Energy Systems (Day Close below $1.00 since November 15, 2011)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=SHZ">SHZ</a> -- China Shen Zhou Mining (Day Close below $1.00 since May 8, 2012)<br /> <a href="http://www.fixyou.co.uk/tracker_details.php?s=TPI">TPI</a> -- Tianyin Pharmaceutical (Day Close below $1.00 since November 15, 2011)<br />The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com29tag:blogger.com,1999:blog-6154015141484451605.post-22729422009679926002012-09-30T15:10:00.000+01:002012-09-30T15:10:17.482+01:00The Current State of the Market for US-listed China StocksSoon we have the opportunity to observe the second anniversary of the first Chinese delisting from Nasdaq. RINO International (RINO) was delisted just three weeks after short-seller Muddy Waters Research published a damaging report on the company and RINO had to concede that some of its claims about contracts were made-up. This was the beginning of two terrible years for U.S.-listed companies that are based in China. Many more frauds and severe accounting irregularities were uncovered, followed by dozens of delistings from NYSE and Nasdaq and a general hostility towards Chinese companies that led to a massive sell-off of Chinese stocks by foreign investors.<br />
<br />
Small cap stocks were most affected while Chinese blue chips, mostly ADRs, survived the turmoil relatively unharmed. Of the ~280 U.S.-listed small- and micro-cap China stocks we are tracking at Trading China, only 9 stocks saw price gains between December 31, 2010 and September 30, 2012. The vast majority has lost more than half its value, and more than one third (94 stocks) dropped more than 90% during that time. And all of this happened while the general U.S. markets saw massive gains.<br />
<br />
While Chinese blue chips have seen the occasional hiccup, their performance since 2010 clearly shows that foreign investors have not abandoned them and that the sell-off has been mostly confined to the small cap space. An <a href="http://www.fixyou.co.uk/portfolio_11.php">index of 20 U.S.-listed China-based blue chips</a> has gained 5.5% since January 1, 2010, clearly underperforming the general U.S. markets (S&P 500 +29.19%, NASDAQ Composite 37.33%), but even more clearly outperforming the Chinese domestic market, as the leading Chinese index, the Shanghai Composite, lost 36.35% since the beginning of 2010.<br />
<br />
In a series of articles we will recap the past two years for Chinese small cap stocks and look at the current state of those companies in the market.<br />
<blockquote>
1. The Fatalities<br />
2. Delistings<br />
3. Going Dark<br />
4. Going Private<br />
5. Reverse Mergers</blockquote>
<b>The Fatalities</b><br />
<br />
All of the following companies lost their senior exchange listing and most are now quoted on the pink sheets. All of them have been delisted for good reason, many are blatant frauds, others had auditors and senior management resign or they stopped filing reports with the SEC. Those are all failed companies, whether or not there is fraud involved... it doesn't matter anymore. Investing in, or even trading those stocks comes with extreme risk, especially as the SEC has already revoked the registration for several stocks, and others will probably disappear as well.<br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=ABAT">ABAT</a> -- Advanced Battery Technology</b><br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-91.30%</span>)<br />
2012-02-06 -- Last SEC Filing<br />
2011-11-30 -- <span class="negative">Delisting from NASDAQ</span><br />
2011-11-15 -- Trading halted by NASDAQ<br />
2011-10-25 -- CFO Resignation<br />
2011-08-15 -- Last Quarterly/Annual Report: Q2/FY2011 ended June 30, 2011<br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=AOBI">AOBI</a> -- American Oriental Bioengineering</b><br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-73.34%</span>)<br />
2012-06-15 -- Last SEC Filing<br />
2012-06-15 -- Auditor Change<br />
2012-05-29 -- <span class="negative">Delisting from NYSE Amex</span><br />
2012-03-16 -- Trading halted by NYSE Amex<br />
2011-11-14 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011<br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=APWR">APWR</a> -- A-Power Energy</b><br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-97.26%</span>)<br />
2011-11-08 -- Last SEC Filing<br />
2011-10-04 -- Auditor Change<br />
2011-09-26 -- <span class="negative">Delisting from NASDAQ</span><br />
2011-09-15 -- Auditor Engagement<br />
2011-08-17 -- Receives SEC Subpoena<br />
2011-07-05 -- CFO Change<br />
2011-06-27 -- Trading halted by NASDAQ<br />
2011-06-26 -- Auditor Resignation<br />
2010-12-01 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010<br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CAGC</a> -- China Agritech</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-97.64%</span>) <br />
2012-06-27 -- Last SEC Filing <br />
2012-01-16 -- CFO Resignation <br />
2011-05-20 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-04-06 -- Auditor Engagement <br />
2011-03-14 -- Trading halted by NASDAQ <br />
2011-03-14 -- Auditor Resignation <br />
2010-11-13 -- Auditor Change <br />
2010-11-10 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CBEH">CBEH</a> -- China Integrated Energy</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-94.00%</span>) <br />
2012-09-24 -- Last SEC Filing <br />
2012-09-18 -- CFO Change <br />
2011-07-21 -- Auditor Engagement <br />
2011-06-15 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-05-19 -- CFO Appointment <br />
2011-04-28 -- CFO Resignation <br />
2011-04-26 -- Auditor Resignation <br />
2011-04-20 -- Trading halted by NASDAQ <br />
2011-03-16 -- Last Quarterly/Annual Report: FY2010 ended December 31, 2010 <br />
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<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CCDM">CCDM</a> -- China Century Dragon Media</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-100.00%</span>) <br />
2011-10-17 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2011-09-01 -- Last SEC Filing <br />
2011-03-22 -- Auditor Resignation <br />
2011-03-21 -- Trading halted by NYSE Amex <br />
2010-11-22 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CCME">CCME</a> -- China MediaExpress</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-100.00%</span>) <br />
2012-08-28 -- <span class="negative"><b>SEC Registration REVOKED</b></span> <br />
2011-05-19 -- Last SEC Filing <br />
2011-05-19 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-03-13 -- CFO Resignation <br />
2011-03-11 -- Trading halted by NASDAQ <br />
2011-03-11 -- Auditor Resignation <br />
2010-11-09 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
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<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CELM">CELM</a> -- China Electric Motors</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.34%</span>) <br />
2011-09-20 -- Last SEC Filing <br />
2011-09-16 -- CEO Appointment <br />
2011-09-15 -- CEO Resignation <br />
2011-06-14 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2011-05-31 -- Auditor Resignation <br />
2011-05-31 -- CFO Resignation <br />
2011-03-31 -- Trading halted by NYSE Amex <br />
2010-11-12 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
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<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CIIC">CIIC</a> -- China Infrastructure Investment</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-88.41%</span>) <br />
2011-12-16 -- Last SEC Filing <br />
2011-11-18 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-11-14 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br />
2011-09-21 -- CFO Resignation <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CILE">CILE</a> -- China Intelligent Lighting</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.97%</span>) <br />
2011-12-28 -- Last SEC Filing <br />
2011-12-21 -- CFO Resignation <br />
2011-06-14 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2011-04-01 -- Auditor Engagement <br />
2011-03-24 -- Trading halted by NYSE Amex <br />
2011-03-23 -- Auditor Resignation <br />
2010-11-08 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
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<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNEP">CNEP</a> -- China North East Petroleum</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-96.19%</span>) <br />
2012-09-24 -- Last SEC Filing <br />
2012-06-21 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2012-03-01 -- Trading halted by NYSE Amex <br />
2011-11-09 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br />
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<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNGL">CNGL</a> -- China Nutrifruit</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-98.93%</span>) <br />
2012-05-10 -- Last SEC Filing <br />
2012-06-15 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2012-04-26 -- Trading halted by NYSE Amex <br />
2012-02-14 -- Last Quarterly/Annual Report: Q3/FY2012 ended December 31, 2011 <br />
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<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CRTP">CRTP</a> -- China Ritar Power</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-71.16%</span>) <br />
2012-02-15 -- Last SEC Filing <br />
2011-06-24 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-04-18 -- Trading halted by NASDAQ <br />
2010-11-15 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CSKI">CSKI</a> -- China Sky One Medical</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-95.27%</span>) <br />
2012-04-03 -- Last SEC Filing <br />
2012-03-12 -- Auditor Resignation <br />
2012-03-08 -- <span class="negative">Delisting from NASDAQ</span> <br />
2012-02-16 -- Trading halted by NASDAQ <br />
2011-12-16 -- CFO Resignation <br />
2011-11-09 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CTESY">CTESY</a> -- SinoTech Energy</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-100.00%</span>) <br />
2012-05-30 -- <span class="negative"><b>SEC Registration REVOKED</b></span> <br />
2012-05-14 -- Last SEC Filing <br />
2011-10-19 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-08-16 -- Trading halted by NASDAQ <br />
2011-08-05 -- Last Quarterly/Annual Report: Q3/FY2011 ended June 30, 2011 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=CVVT">CVVT</a> -- China Valves Technology</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-95.42%</span>) <br />
2012-09-21 -- <span class="negative">Delisting from NASDAQ</span> <br />
2012-09-11 -- Last SEC Filing <br />
2012-07-16 -- Trading halted by NASDAQ <br />
2012-07-09 -- Auditor Resignation <br />
2012-05-08 -- Last Quarterly/Annual Report: Q2/FY2012 ended March 31, 2012 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=DEER">DEER</a> -- Deer Consumer Products</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-79.44%</span> | currently halted) <br />
2012-08-13 -- Trading halted by NASDAQ <br />
2012-08-09 -- Last SEC Filing <br />
2011-08-09 -- Last Quarterly/Annual Report: Q3/FY2012 ended June 30, 2012 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=DGWIY">DGWIY</a> -- Duoyuan Global Water</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-97.66%</span>) <br />
2012-05-11 -- Last SEC Filing <br />
2012-01-26 -- <span class="negative">Delisting from NYSE</span> <br />
2011-04-06 -- Trading halted by NYSE <br />
2011-04-04 -- CFO Resignation <br />
2011-03-22 -- Last Quarterly/Annual Report: FY2010 ended December 31, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=DYNP">DYNP</a> -- Duoyuan Printing</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-96.59%</span>) <br />
2012-04-16 -- Last SEC Filing <br />
2011-04-13 -- <span class="negative">Delisting from NYSE</span> <br />
2010-09-08 -- CEO/CFO Appointment <br />
2010-09-08 -- CEO Resignation <br />
2010-09-06 -- CFO Resignation <br />
2010-09-06 -- Auditor Dismissal <br />
2010-05-11 -- Last Quarterly/Annual Report: Q2/FY2010 ended March 31, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=FEED">FEED</a> -- Agfeed Industries</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-86.06%</span>) <br />
2012-09-24 -- Last SEC Filing <br />
2012-07-27 -- CFO Resignation <br />
2012-04-18 -- CEO Appointment <br />
2012-02-10 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-12-19 -- Trading halted by NASDAQ <br />
2011-12-16 -- CEO Resignation <br />
2011-08-09 -- Last Quarterly/Annual Report: Q2/FY2011 ended June 30, 2011 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=FUQI">FUQI</a> -- Fuqi International</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-86.68%</span>) <br />
2012-07-26 -- Last SEC Filing <br />
2011-07-30 -- CFO Resignation <br />
2011-03-29 -- <span class="negative">Delisting from NASDAQ</span> <br />
2009-11-09 -- Last Quarterly/Annual Report: Q3/FY2009 ended September 30, 2009 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=HEAT">HEAT</a> -- SmartHeat</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-23.49%</span> | currently halted) <br />
2012-08-28 -- Last SEC Filing <br />
2012-08-20 -- Last Quarterly/Annual Report: Q2/FY2012 ended June 30, 2012 <br />
2012-07-10 -- CFO Appointment <br />
2012-05-30 -- Trading halted by NASDAQ <br />
2012-05-25 -- CEO Resignation <br />
2012-05-25 -- CFO Resignation <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=HQSM">HQSM</a> -- HQ Sustainable Maritime</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-100.00%</span>) <br />
2012-04-10 -- <span class="negative"><b>SEC Registration REVOKED</b></span> <br />
2011-08-10 -- Last SEC Filing <br />
2011-07-12 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2011-05-26 -- Auditor Resignation <br />
2011-04-01 -- Trading halted by NYSE Amex <br />
2010-11-09 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=JGBO">JGBO</a> -- Jiangbo Pharmaceuticals</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-98.78%</span>) <br />
2011-08-16 -- Last SEC Filing <br />
2011-08-04 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-05-31 -- Trading halted by NASDAQ <br />
2011-05-23 -- Last Quarterly/Annual Report: Q3/FY2011 ended March 31, 2011 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=NIVS">NIVS</a> -- NIVS IntelliMedia Technology</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.08%</span>) <br />
2011-08-26 -- Last SEC Filing <br />
2011-06-24 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2011-06-09 -- Auditor Engagement <br />
2011-05-14 -- Auditor Resignation <br />
2011-04-10 -- Auditor Engagement <br />
2011-03-24 -- Trading halted by NYSE Amex <br />
2011-03-23 -- Auditor Resignation <br />
2010-11-04 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=ORSX">ORSX</a> -- Orsus Xelent Technologies</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-93.63%</span>) <br />
2011-11-15 -- Last SEC Filing <br />
2011-10-21 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2011-08-22 -- Last Quarterly/Annual Report: Q2/FY2011 ended June 30, 2011 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=PUDA">PUDA</a> -- Puda Coal</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.51%</span>) <br />
2011-09-02 -- <span class="negative">Delisting from NYSE Amex</span> <br />
2011-09-01 -- Last SEC Filing <br />
2011-08-19 -- Auditor Engagement <br />
2011-07-07 -- Auditor Resignation <br />
2011-04-11 -- Trading halted by NYSE Amex <br />
2011-03-16 -- Last Quarterly/Annual Report: FY2010 ended December 31, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=QXMCF">QXMCF</a> -- Qiao Xing Mobile Communication</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-100.00%</span>) <br />
2012-08-23 -- <span class="negative"><b>SEC Registration REVOKED</b></span> <br />
2012-06-15 -- <span class="negative">Delisting from NASDAQ</span> <br />
2012-05-02 -- CFO Resignation <br />
2012-04-16 -- Trading halted by NASDAQ <br />
2011-11-30 -- Last Quarterly/Annual Report: Q2/FY2011 ended June 30, 2011 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=SBAY">SBAY</a> -- Subaye</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-99.97%</span>) <br />
2011-11-04 -- Last SEC Filing <br />
2011-11-01 -- CFO Resignation <br />
2011-06-24 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-06-01 -- CFO Appointment <br />
2011-05-20 -- CFO Resignation <br />
2011-05-12 -- CEO Appointment <br />
2011-05-12 -- CEO Resignation <br />
2011-04-08 -- Trading halted by NASDAQ <br />
2011-04-01 -- Auditor Resignation <br />
2011-03-13 -- CFO Appointment <br />
2011-03-10 -- CFO Resignation <br />
2010-12-23 -- Auditor Change <br />
2010-12-23 -- Last Quarterly/Annual Report: FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=SCEI">SCEI</a> -- Sino Clean Energy</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-95.01%</span>) <br />
2012-09-28 -- Last SEC Filing <br />
2012-09-25 -- <span class="negative">Delisting from NASDAQ</span> <br />
2012-08-10 -- CFO Resignation <br />
2012-05-21 -- Trading halted by NASDAQ <br />
2012-05-15 -- Last Quarterly/Annual Report: Q1/FY2012 ended March 31, 2012 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=SIHI">SIHI</a> -- SinoHub</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-94.26%</span> | currently halted) <br />
2012-09-24 -- Last SEC Filing <br />
2012-09-07 -- Trading halted by NYSE Amex <br />
2012-08-31 -- Auditor Resignation <br />
2012-05-15 -- Last Quarterly/Annual Report: Q1/FY2012 ended March 31, 2012 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=UTRA">UTRA</a> -- Universal Travel Group</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-88.73%</span>) <br />
2012-08-15 -- Last SEC Filing <br />
2012-05-08 -- <span class="negative">Delisting from NYSE</span> <br />
2011-11-14 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011 <br />
2011-04-12 -- Trading halted by NYSE <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">WATG</a> -- Wonder Auto Technology</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-96.03%</span>) <br />
2012-09-19 -- Last SEC Filing <br />
2011-12-13 -- Auditor Engagement <br />
2011-12-06 -- Auditor Resignation <br />
2011-09-12 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-07-25 -- CFO Appointment <br />
2011-07-12 -- CFO Resignation <br />
2011-07-12 -- CEO Resignation <br />
2011-05-09 -- Trading halted by NASDAQ <br />
2010-12-06 -- Auditor Change <br />
2010-11-09 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=WEMU">WEMU</a> -- Worldwide Energy and Manufacturing USA</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-100.00%</span>) <br />
2012-05-16 -- <span class="negative"><b>SEC Registration REVOKED</b></span> <br />
2011-05-30 -- CFO Appointment <br />
2011-04-26 -- CFO Resignation <br />
2011-04-25 -- CEO Appointment <br />
2011-04-25 -- CEO Fired <br />
2011-02-19 -- CFO Appointment <br />
2011-02-19 -- CFO Resignation <br />
2010-11-22 -- Last Quarterly/Annual Report: Q3/FY2010 ended September 30, 2010 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=XINGF">XINGF</a> -- Qiao Xing Universal Resources</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-100.00%</span>) <br />
2012-08-23 -- <span class="negative"><b>SEC Registration REVOKED</b></span> <br />
2012-06-15 -- <span class="negative">Delisting from NASDAQ</span> <br />
2012-04-16 -- Trading halted by NASDAQ <br />
2012-01-19 -- Auditor Change <br />
2011-12-01 -- Last Quarterly/Annual Report: Q2/FY2011 ended June 30, 2011 <br />
<br />
<b><a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">YUII</a> -- Yuhe International</b> <br />
(Performance Dec 31, 2010 to Sep 30, 2012: <span class="negative">-98.55%</span>) <br />
2012-07-26 -- Last SEC Filing <br />
2012-07-20 -- CFO Resignation <br />
2011-08-10 -- Auditor Engagement <br />
2011-07-21 -- <span class="negative">Delisting from NASDAQ</span> <br />
2011-06-17 -- Trading halted by NASDAQ <br />
2011-06-17 -- Auditor Resignation <br />
2011-05-16 -- Last Quarterly/Annual Report: Q1/FY2011 ended March 31, 2011 The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com12tag:blogger.com,1999:blog-6154015141484451605.post-29897519130309198882011-11-27T13:28:00.005+00:002011-11-27T13:48:06.601+00:00Chinese Solar Companies - AnalysisNow that we have the third quarter results for all the Chinese solar companies, let's have a closer look at the performance, numbers and developments in the industry.<br /><br /><b>Third Quarter 2011 Results:</b><br /><img src="http://www.fixyou.co.uk/images/20111123_1.png" width="812" height="684" /><br /><p><b>Revenue</b><br /><br />For our group of ten companies, third quarter revenue declined both sequentially and year-over-year. Revenue for the traditionally much stronger third quarter declined on average by 9.6% from the second quarter of 2011. Only four companies - <b>Canadian Solar</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CSIQ">CSIQ</a>), <b>China Sunergy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CSUN">CSUN</a>), <b>Suntech Power Holdings</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=STP">STP</a>) and <b>Yingli Green Energy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=YGE">YGE</a>) could keep the same level from last quarter, while three companies posted hefty declines of 20% or more: <b>Hanwha Solarone</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HSOL">HSOL</a>), <b>JinkoSolar</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=JKS">JKS</a>), and <b>ReneSola</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SOL">SOL</a>).<br /><br />Those are disastrous numbers, especially if compared to what happened just one year ago. For the third quarter of 2010, ReneSola posted sequential revenue growth of 41.3%, compared to a revenue decline of 24.2% this year. For <b>Trina Solar</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=TSL">TSL</a>) those numbers are 37.1% growth versus 16.8% decline, but we can pick any name in the group to illustrate the unusual downtown in the traditionally very busy third quarter this year.<br /><br />If we compare the Q3 revenue numbers with those of 2010, the picture looks slightly better with a year-over-year decline of "just" 3.8%. Most of this decline comes from the primarily upstream (solar wafers and cells) companies in the group: <b>LDK Solar</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=LDK">LDK</a>), ReneSola, and <b>JA Solar</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=JASO">JASO</a>), which on average lost 36.4% of their 2010 revenue. If we take those three out of the group, the rest - primarily module producers - managed to post year-over-year revenue growth of 10.2%.<br /><br />The big exception among the downstream Chinese solars is Hanwha Solarone (HSOL) with year-over-year revenue decline of 34.4%. This might be a huge warning sign, as five out of seven of HSOL's direct peers managed to grow their revenue over the same period. Please review the numbers for all ten companies in the table above.<br /><br /><span class="positive">POSITIVE:</span> CSIQ, CSUN, STP, YGE<br /><span class="negative">NEGATIVE:</span> <b>HSOL</b>, <b>JASO</b>, JKS, <b>LDK</b>, <b>SOL</b>, TSL<br /><br /><b>Gross Profit and Margins</b><br /><br />In the third quarter of 2010 all ten of our Chinese solar companies posted double digit gross margins, ranging from the high teens to well into the 30 percent area. Just twelve months later those margins have collapsed for 90% of the group, with five companies reporting negative gross margins. As to be expected, the smallest module vendors, China Sunergy and Hanwha Solarone, suffered the most, as the solar industry is - and will always be - an industry of scale.<br /><br />Only three of the ten companies still posted worthwhile gross margins last quarter, the market and cost leaders among the Chinese module producers: Trina Solar, Yingli Green, and Suntech Power. Especially STP is standing out here. The company moved from last to first place in the group, as its margins only moderately declined, from 17.9% in 2010 to 13.3% this year.<br /><br />Those numbers stand in stark contrast to two other downstream companies. JinkoSolar's margins collapsed from 25.4% in Q2/2011 - the highest of the group at that time - to 3.7% in just three months, the direct effect of a 21.4% sequential decline in revenue. And while Canadian Solar managed to actually grow revenue sequentially, its gross margins (2.4%) are no longer acceptable which suggests that the company's strategy was to generate revenue at all cost.<br /><br /><span class="positive">POSITIVE:</span> <b>STP</b>, TSL, YGE<br /><span class="negative">NEGATIVE:</span> CSIQ, <b>CSUN</b>, <b>HSOL</b>, <b>JASO</b>, <b>JKS</b>, <b>LDK</b>, <b>SOL</b><br /><br /><b>Net Income and EPS</b><br /><br />One year ago, all ten companies in our group were nicely profitable with operating margins ranging from 8.4% (STP) to 26.4% (JKS) and positive earnings per share. In Q2/2011, half of the group was already posting losses, and for the third quarter only Yingli Green Energy managed to break even on an operating level. These are disastrous results for the industry, especially if we consider that half of the group posted significant year-over-year revenue growth.<br /><br />All ten companies were forced to write off some inventory which impacted the bottom line. However, if we adjust reported net income for these inventory write-downs, nine out of ten companies have still reported negative EPS. Only Yingli Green Energy reported positive numbers on an adjusted basis with $0.08 per share excluding write-downs and $0.14 per share as reported by the company on a non-GAAP basis. Yingli's business development trends look far better than those reported by its direct peers.<br /><br /><span class="positive">POSITIVE:</span> YGE<br /><span class="negative">NEGATIVE:</span> CSIQ, <b>CSUN</b>, <b>HSOL</b>, <b>JASO</b>, <b>JKS</b>, <b>LDK</b>, <b>SOL</b>, STP, TSL<br /><br /><b>Company Guidance Revisions:</b> (since June 30, 2011)<br /><img src="http://www.fixyou.co.uk/images/20111123_2.png" width="812" height="117" /><br />Official company guidance and what the company says about its business prospects can be very telling about how well management understands its market. Assumed management actually intends to tell the truth and give a realistic business outlook. If they have been utterly wrong several times in the past, why should we put too much weight on their current outlook?<br /><br />We have evaluated the officially published FY2011 guidance for all ten Chinese solar companies, and the only one that actually raised its guidance at some point this year was LDK Solar. In January, <a href="http://www.sec.gov/Archives/edgar/data/1385424/000095012311001663/h04761e6vk.htm">LDK raised its full year revenue outlook</a> by an astonishing $600 million and guided for gross margins in the 23.0% to 28.0% range. In mid-March <a href="http://www.sec.gov/Archives/edgar/data/1385424/000095012311026617/h04925e6vk.htm">Chairman Peng addressed the investment world</a> with <i>"we have made great strides in positioning LDK Solar to take advantage of the growth in the global PV industry. We remain excited about the multiple growth drivers we see for our business and believe we are well positioned for success."</i> LDK reiterated its revenue guidance and raised the low end for gross margins by another percentage point.<br /><br />Management kept this guidance until well into the third quarter when it was already very obvious that nothing of this will materialize. And for the third quarter the company reported a 30% decline in revenue with negative gross margins. Consequently, LDK's current FY 2011 guidance has been lowered by almost 40% from levels that were still official company outlook in August. <br /><br />While the industry downturn forced nine of our ten companies to lower FY2011 guidance in the second half of this year, it is important to note that several names have not lost their credibility and have given a more or less realistic outlook at the beginning of the year. The only one that kept its original shipment guidance unchanged is Canadian Solar (CSIQ), while both Suntech Power and Yingli have lowered it only moderately. Those three are also the largest module vendors, based on Q3 revenue, while the small players in the group, CSUN and JASO, were forced to slash their guidance by at least 25%. <br /><br /><span class="positive">POSITIVE:</span> <b>CSIQ</b>, STP, YGE<br /><span class="negative">NEGATIVE:</span> <b>CSUN</b>, HSOL, JASO, <b>LDK</b>, SOL<br /><br /><b>Debt Situation:</b><br /><i>Net Debt (Debt): Total Liabilities - Total Current Assets (ex Inventories)<br />Debt to Equity (D/E): Total Liabilities - Total Shareholders' Equity</i><br /><img src="http://www.fixyou.co.uk/images/20111123_3.png" width="667" height="265" /><br />The debt situation is rapidly deteriorating for all 10 companies, and as the outlook for the industry is very negative for at least another 2-3 quarters, this is not going to become even worse. Further EPS losses are very likely for Q4/2011 to Q2/2012, probably even into the third quarter next year. While Trina Solar (low net debt) and Yingli Green Energy (large cash position) both look safe at this point, its huge debt burden could turn out to be a bigger problem for Suntech Power.<br /><br />For LDK Solar the picture looks very bleak. With negative gross profit, a low cash position and rapidly deteriorating revenue, LDK is already running low on working capital, and if we consider the interest expense on its gigantic debt load something will have to happen next year to resolve this situation. If the company wants to survive this downturn, a debt to equity swap seems unavoidable, which means there is very little value in LDK's stock.<br /><br /><span class="positive">POSITIVE:</span> JASO, <b>TSL</b><br /><span class="negative">NEGATIVE:</span> CSUN, CSIQ, JKS, <b>LDK</b>, <b>STP</b><br /><br /><b>Summary:</b><br /><br />Third quarter earnings results for our group of 10 Chinese solar companies were generally weak, with only YGE (and to a lesser degree STP) providing some positive headlines. End markets are supposed to remain challenging for at least another 2-3 quarters with an unresolved debt crisis in Europe, massive overcapacity issues in the industry, high inventory levels, and ASP's rapidly declining. Despite collapsing end prices there was no meaningful demand uptick in the traditionally strong third quarter, and the near future brings us unfavourable weather conditions for all of the industry's strongest markets.<br /><br />All signs point to a period of painful consolidation in the industry that is coming much earlier than anticipated. The weak players will be shaken out and eventually the industry will turn into oligopoly where only a handful of players will dominate the market. Third quarter results are a good indication of who will make it and who might eventually vanish over the next few years. With no positive catalysts to be expected over the next few months, it is probably to early to jump back into the sector, but the survivors will most likely come out stronger than before, in an industry that is here to stay.<br /><br />Based on this analysis of business metrics and third quarter results, here is my take on the survival chances for all ten Chinese solar companies:<br /><br /><span class="positive">GOOD:</span> YGE<br />NEUTRAL: CSIQ, STP, TSL<br /><span class="negative">BAD:</span> CSUN, HSOL, JASO, JKS, SOL<br /><span class="negative">VERY BAD:</span> LDKThe Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com18tag:blogger.com,1999:blog-6154015141484451605.post-59431584675408118032011-07-24T15:52:00.003+01:002011-07-24T16:07:30.141+01:00A Close Look at Gulf Resources<b>Gulf Resources</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=GURE">GURE</a>) is currently trading at $3.80, down 64.46% for the year. The Trading China Tracker Score is 19 (Strong Buy), the Trading China Safety Score is 36% (High Risk).<br /><br />Let's have a detailed look at Gulf Resources, a producer of bromine, crude salt, and specialty chemicals in China. The company has two operating subsidiaries, one for the chemicals, and another for salt and bromine. The stock has lost two thirds of its value since the beginning of the year, despite record results for FY2010 and positive pricing developments for its core products. Is it worth putting some money at risk here? Let's start with a detailed timeline of the past 18 months to see what exactly has been going on with this stock.<br /><br /><b>Gulf Resources Timeline</b><br /><br /><b>2010, February 10:</b> Gulf Resources dismisses Morison Cogen and <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510000389/e606425_8k-gulf.htm">engages BDO Limited as its new auditor</a>.<br /><br /><b>2010, April 14:</b> The company <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510001073/e606803_ex99-1.htm">raises guidance for fiscal year 2010</a> to revenue between $146 million and $150 million and net income between $44 million and $46 million. It says that "in addition to strong demand, a shortage of bromine supply is supporting prices."<br /><br /><b>2010, May 11:</b> Gulf Resources <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510001330/e606953_ex99-1.htm">reiterates revenue and net income guidance for 2010</a> with the release of First Quarter earnings.<br /><br /><b>2010, June 8:</b> GURE announces the <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510001669/e607143_ex99-1.htm">acquisition of bromine and crude salt manufacturing assets</a> for $13.9 million, paid in cash (95%) and stock.<br /><br /><b>2010, August 6:</b> The company <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002068/e607298_s3-gulf.htm">files a mixed securities shelf for $120 million</a> with the SEC. <br /><br /><b>2010, August 16:</b> Gulf Resources <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002277/e607440_ex99-1.htm">reiterates revenue and net income guidance for 2010</a> with the release of Second Quarter earnings.<br /><br /><b>2010, September 10:</b> <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002404/e607516_ex99-2.htm">Deloitte Touche Tohmatsu is engaged</a> to perform an independent assessment over the Company's internal controls. <br /><br /><b>2010, September 14:</b> The company <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002404/e607516_ex99-3.htm">defends the shelf registration</a> in a press release, but clarifies that while it plans to use its common stock as currency for acquisitions, it will only happen at levels that are accretive to existing shareholders."<br /><br /><b>2010, September 15:</b> Due to its depressed stock price, management announces that it has <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002404/e607516_ex99-4.htm">decided not to raise capital during 2010</a>. The shelf registration remains effective.<br /><br /><b>2010, September 15:</b> The company <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002404/e607516_ex99-1.htm">raises guidance for fiscal year 2010</a> to revenue between $151 million and $155 million and net income between $48 million and $50 million, as a result of a further increase in bromine prices.<br /><br /><b>2010, September 27:</b> A <a href="http://www.gulfresourcesinc.cn/news/gulf-resources-announces-10-million-share-repurchase-program.html">$10 million Share Repurchase Program is announced</a>. "We are confident that this is an optimal opportunity to leverage our strong balance sheet and invest in Gulf Resources."<br /><br /><b>2010, November 6:</b> <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002770/e607695_8k-gulf.htm">Independent director Biagio Vignolo resigns</a> without stating a reason. He is replaced with Mr. Nan Li who works as financial controller at Global Pharm Holdings Group (<a href="http://www.google.com/finance?q=OTC%3AGPHG">GPHG.OB</a>).<br /><br /><b>2010, November 16:</b> Gulf Resources <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002841/e607728_ex99-1.htm">reiterates revenue and net income guidance for 2010</a> with the release of Third Quarter earnings.<br /><br /><b>2010, December:</b> The company is <b>anonymously accused of falsifying its financial statements</b> filed with the SEC. Allegedly, there are discrepancies between data filed with Chinese authorities (SAT) and the Securities and Exchange Commission.<br /><br /><b>2010, December 8:</b> Xiaobin Liu, CEO of Gulf Resources, <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510002975/e607818_ex99-1.htm">responds to those allegations</a>, says they were completely without merit and that all financial statements are accurate.<br /><br /><b>2010, December 14:</b> The company <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380510003066/e607856_ex99-1.htm">follows up with a detailed response</a>, confirms that its 2009 Annual Report is consistent with its 2009 SAT filings, and provides proof in form of an official letter from the local SAT bureau, which is confirming that there are serious discrepancies between GURE's subsidiaries' actual tax filings and the figures provided in the anonymous report. CEO Liu reassures investors that "our financial statements are accurate and we do not expect any adjustments to them. Our business has maintained its momentum and we do not expect any changes in business conditions in the foreseeable future."<br /><br /><b>2011, January 4:</b> Gulf Resources announces the <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000007/e607910_8k-gulf.htm">acquisition of a crude salt field</a> from a state-owned company for $10.6 million in cash.<br /><br /><b>2011, March 2:</b> <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000432/e608145_8k-gulf.htm">Independent director Richard Khaleel resigns</a> from GURE's Board, as the company he recently joined has requested that he resigns as a director of any public company. Khaleel's replacement is Mr. Yang Zou, a senior accountant with a Beijing-based CPA firm.<br /><br /><b>2011, March 4:</b> Deloitte has issued a final report regarding the internal control assessment performed. <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000433/e608146_ex99-1.htm">Management believes that the Company's internal control is improved</a> after implementing the recommendations made by Deloitte.<br /><br /><b>2011, March 16:</b> GURE files its <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000481/e608177_10k-gulf.htm">Annual Report for 2010</a>. Reported revenue of $158.3 million and net income of $51.3 million both exceed the high end of the company's official financial guidance, which had been raised twice in 2010. Gulf Resources provides a favourable outlook for 2011, without giving specific guidance at this time. Internal control over financial reporting, as audited by BDO Limited in the 10-K filing, is still ineffective due to a "material weakness regarding management's <b>failure to maintain effective controls over the identification of related parties and the disclosure of related party transactions</b> in the company's consolidated financial statements."<br /><br /><b>2011, March 28:</b> The company <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000588/e608270_ex99-2.htm">provides financial guidance for 2011</a>. It expects revenue to range from $195 million to $198 million and net income to range from $64 million and $66 million. CEO Liu says he expects "the price of bromine to stabilize at a high level and possibly reach a new historical high price during 2011."<br /><br /><b>2011, April 26:</b> Short-selling outfit <a href="http://www.glaucusresearch.com/">Glaucus Research Group</a> releases an <a href="http://www.glaucusresearch.com/GlaucusResearch-Gulf_Resources-GFRE-Strong_Sell-April_26_2011.pdf">extensive 29-page report</a> on Gulf Resources. The group "initiates coverage" with a $0.00 price target, based on its belief that investors "are likely holding worthless paper in a shell company." Glaucus claims that "the two Chinese subsidiaries that own and operate the business are privately owned by a company controlled by the chairman."<br /><br /><b>2011, April 27:</b> John Hempton of <a href="http://brontecapital.blogspot.com/">Bronte Capital</a>, who is also short the stock, <a href="http://brontecapital.blogspot.com/2011/04/gulf-resources-sometimes-you-only-need.html">comes out in support</a> of the Glaucus report. He argues that an inventory turnover of 169.5 times per year is not believable in the bromine industry.<br /><br /><b>2011, April 28:</b> The company issues a <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000813/e608390_ex99-1.htm">detailed response to the Glaucus Report</a>. Explains that it produces most of its bromine and chemical products on demand, therefore does not accumulate inventory. Provides 2009 SAIC filings for both its subsidiaries and concludes that reported SAIC financials are in line with SEC filings. Provides documents that should prove ownership of subsidiaries. Explains low shipping costs with customers directly picking up their products from facilities. Reiterates that Deloitte's internal control assessment did not find major issues in the Company's corporate governance and internal control system.<br /><br /><b>2011, May 2:</b> Gulf Resources <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000827/e608396_ex99-1.htm">issues a second press release</a> in response to the allegation in the Glaucus Report.<br /><br /><b>2011, May 11:</b> Gulf Resources <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000886/e608425_ex99-1.htm">issues a third press release</a> in response to the allegation in the Glaucus Report.<br /><br /><b>2011, May 16:</b> The company <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511000959/e608476_ex99-1.htm">reiterates revenue and net income guidance for 2011</a> with the release of First Quarter earnings. Says it expects bromine prices to remain at current levels for the remainder of the year.<br /><br /><b>2011, May 19:</b> Another short-seller, <a href="http://kerrisdalecap.com/">Kerrisdale Capital</a> publishes a <a href="http://seekingalpha.com/article/270786-gulf-resources-financial-claims-are-beyond-reason">hit piece</a>, supporting the April 26 Glaucus report and adding its own claims, particularly that GURE's reported profit margins "are too good to be true." Kerrisdale concludes that Gulf Resources' "business claims are not within the realm of reason."<br /><br /><b>2011, June 7:</b> GURE announces that it <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511001074/e608537_ex99-1.htm">intends to register a subsidiary</a> in Daying county, Sichuan province, in order to research possible resources for bromine and crude salt in Sichuan province.<br /><br /><b>2011, June 22:</b> <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511001163/e608594_8k-gulf.htm">BDO Limited is reappointed</a> as the company's auditor for the 2011 fiscal year.<br /><br /><b>2011, June 23:</b> Gulf Resources announces that the <a href="http://www.gulfresourcesinc.cn/news/gulf-resources-initiates-shares-repurchase-plan.html">share repurchase program</a>, announced in September 2010, has been initiated, and the company has acquired 100,500 shares of its common stock through open market transactions.<br /><br /><b>2011, June 29:</b> <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511001237/e608627_ex10-1.htm">Independent director Yafei Ji resigns</a> for "personal reasons." He is replaced by Mr. Tengfei Zhang, a CPA and Chairman of the Board of Supervisors of Shenzhen Kaili Industrial Co., a manufacturer of computer cables.<br /><br /><b>2011, June 30:</b> Gulf Resources' <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511001192/e608613_ex99-1.htm">ticker symbol changes</a> from 'GFRE' to 'GURE'.<br /><br /><b>2011, July 13:</b> Chairman Ming Yang, the company's largest shareholder (38.7%), declares that he <a href="http://www.sec.gov/Archives/edgar/data/885462/000119380511001290/e608659_ex99-1.htm">will not pledge or sell any of his shares in the next three years</a>. The company reiterates that it maintains 100% ownership in its subsidiaries, that its corporate structure remains linear and unchanged since February 2007, and that Gulf Resources maintains full control over its operating subsidiaries. Documentation for subsidiary ownership is attached to the 8-K Filing.<br /><br /><b>2011, July 20:</b> The company <a href="http://www.gulfresourcesinc.cn/news/gulf-resources-withdraws-its-registration-statement-on-form-s-3.html">withdraws its shelf registration</a> that was originally filed on August 6, 2010. "We decided to withdraw our registration statement because we think our share price remains undervalued and do not intend to sell any securities under the registration statement."<br /><br /><b>Evaluation</b><br /><br /><span class="positive"><b>Extremely Cheap Valuation</b></span> - GURE has posted Earnings per Share of $1.48 for the fiscal year ended December 31, 2010. Official 2011 guidance calls for 24.8% to 28.7% net income growth, not taking into account any impact from potential acquisitions. During 2010, the company raised its guidance twice and managed to exceed the high end of its guidance range when it posted final numbers in March. At Friday's close ($3.80) the stock is trading at a forward P/E of 2.05, based on 2011e EPS of $1.85. That is about as cheap as it gets for a Nasdaq-listed growth stock.<br /><br /><span class="positive"><b>No Shareholder Dilution</b></span> - the company did not sell any stock in the past 18 months. The shelf registration that became effective in August of 2010 has been withdrawn earlier this month. GURE paid for all its recent acquisitions almost entirely in cash. Total dilution for existing shareholders over the past year was just 2.38%, which is among the lowest with U.S.-listed Chinese stocks. If GURE were a fraud then it is certainly not very clever with monetizing its stock.<br /><br /><span class="positive"><b>Management Continuity</b></span> - Unlike most other Chinese names, Gulf Resources has not been hit with a slew of management resignations. The Chairman of the Board, CFO and CEO are all with the company for a long time. There have been three director resignations in the past 18 months, but I believe it is credible that none of them were in disagreement. I also believe that it is part of good corporate governance if a company changes its independent directors every once in a while.<br /><br /><span class="positive"><b>Strong Responses to Short Seller Attacks</b></span> - Gulf Resources has been a short seller target for more than a year, the depressed stock price clearly reflects that now. Yet, the company has always been very quick, detailed and elaborate in its response to such attacks, unlike most other names in the China space. GURE does reliably provide documents to support its position and publicly files those with the SEC so all interested parties can review them easily.<br /><br /><span class="negative"><b>Corporate History</b></span> - This is the strongest negative aspect, and it is one that will never go away. Gulf Resources' public company life began with a China Finance (<a href="http://www.google.com/finance?q=OTC:CHFI">CHFI.PK</a>) shell, in connection with reverse merger specialists like China US Bridge Capital, a subsidiary of CHFI. China Finance went dark in 2009, stopped filing anything with the SEC, and is now a 2-cent zombie stock. All of the other CHFI RTO's are either complete frauds or extremely questionable at least, including CNOA, JADA, BFAR and CHCG. It is a bit of a stretch to argue that Gulf Resources is the one exception in an otherwise smelly pit of dirt.<br /><br />However, and here it comes, proclaiming guilt by association has never been a good or wise strategy. Gulf does surely wish - fraud or not - they would have never been associated with China Finance, but we should judge them by their actions after all. Maybe they have cut all the ties with CHFI, as they say they have, a long time ago already? The company's communication with investors in the past 18 months certainly doesn't bear any resemblance with other former CHFI clients.<br /><br /><span class="negative"><b>Prime Short Seller Target</b></span> - GURE has been attacked several times by multiple individuals and entities. Short interest in the stock sits at about 20% of the float and has been at a very high level for most of 2011. While the company has managed to stabilize the stock price since May, none of the recent announcements led to a meaningful recovery and investors are still sitting on a loss of 64% for the year.<br /><br /><span class="negative"><b>Half-hearted Stock Buyback</b></span> - There is no better investment for a company like Gulf Resources than investing in its own stock at just 2x forward earnings. But it took the company almost nine months to initiate its buyback program that was announced in September of last year. And the number of shares (~ 100k) that has been repurchased so far is very small for a company that supposedly has more than $80 million cash on the bank. <br /><br /><span class="negative"><b>Ineffective Internal Controls</b></span> - BDO attested that the company's internal controls are ineffective due to a "material weakness regarding management's failure to maintain effective controls over the identification of related parties and the disclosure of related party transactions." Gulf management hired Deloitte Touche Tohmatsu for an internal control assessment, and announced that DTT did not find major issues in the Company's corporate governance and internal control system. We don't know what issues Deloitte found, but we know that related party issues are one of the short sellers' most prominent claims.<br /><br /><b>Conclusion</b><br /><br />Bottom line is, I don't have any conclusion - you have the choice between a "Yes, but..." and a "No, but..." approach. It is my belief that GURE's stock price will more likely appreciate from here than deteriorate, as the main reason for its low level is the general investing public's reluctance to put money in any name with a strong "but...", especially Chinese reverse mergers. We are now probably beyond the peak of "weeding out China frauds" and there are signs that investor appetite for the remaining Chinese names is slowly but steadily increasing from here. <br /><br />There are compelling arguments for taking a position in GURE at the current level, however the arguments for staying away completely are also quite convincing. This is the prototype of a "high risk" stock which could easily double or even triple from here if/when market sentiment improves. But those risks are real and they are obvious to most market participants, so cautious investors should act accordingly.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com38tag:blogger.com,1999:blog-6154015141484451605.post-3878710593001966212011-07-23T21:26:00.004+01:002011-07-23T21:49:17.033+01:00China Stock Obituary 2011<b>China Agritech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC.PK">CAGC.PK</a>) is currently trading at $1.65, down 86.56% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 8% (Extreme Risk).<br /><br />Fertilizer company China Agritech has been accused of many things, among them drastically overstating the scope of its business. Things turned fatal when CAGC did not file its annual report for 2010, and subsequently dismissed its Big Four auditor Ernst & Young with <a href="http://www.sec.gov/Archives/edgar/data/1166389/000114420411015802/v215259_8k.htm">very questionable reasoning</a>. CAGC has since engaged a new auditor, California-based Simon & Edward, and a new chairman for both the audit committee and the special committee that was formed in March to look into the matters that led to the initial Nasdaq trading halt. In late May the Chief Operating Officer of CAGC resigned. We haven't heard any details from the ongoing investigation for the past three months, and the company's stock is trading on the pink sheets since May 20, 2011.<br /><br /><b>China-Biotics</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CHBT.PK">CHBT.PK</a>) is currently trading at $1.73, down 88.27% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 7% (Extreme Risk).<br /><br />Probiotics company CHBT has been under attack for more than a year until on June 22, BDO Limited, the company's auditor for more than five years, resigned. The firm found several "irregularities" that "<a href="http://sec.gov/Archives/edgar/data/1271057/000114420411037217/v226804_8k.htm">likely constitute illegal acts</a>", including fake documentation and being directed by the Company to access a suspected fake website for the company's bank account. One day later, the company's CFO and the Chairman of the Audit Committee resigned as well. The stock was delisted from Nasdaq on July 1 and finds itself now on the pink sheets.<br /><br /><b>China Century Dragon Media</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CCDM.PK">CCDM.PK</a>) is currently trading at $0.30, down 94.29% from it's IPO price of $5.25 (February 8, 2011). The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 7% (Extreme Risk).<br /><br />On March 22, just six weeks after CCDM's IPO on NYSE Amex, its auditor found "an indication that the accounting records have been falsified, which would constitute an illegal act." The company was unwilling to let its auditor obtain official bank records directly from the bank, and MaloneBailey resigned its engagement with the company. Similar to all the other cases, the stock was halted by the exchange, delisted, and is now quoted on the pink sheets since June 21, where it is now a "zombie stock" with not a single share having changed owners in the past four weeks.<br /><br /><b>China Electric Motors</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CELM.PK">CELM.PK</a>) is currently trading at $0.33, down 92.73% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 0% (Extreme Risk).<br /><br />CELM was destined to share the fate of the other WestPark deals NIVS, CILE and CCDM (for details please see: "<a href="http://china.fixyou.co.uk/2011/03/westpark-capitals-rto-deals.html">WestPark Capital's RTO Deals</a>"). The auditor (MaloneBailey) found discrepancies in the bank statements, a Special Committee was formed on March 31 to investigate those issues, and an SEC investigation was launched on April 7. On May 24, <a href="http://www.sec.gov/Archives/edgar/data/1421526/000114420411032858/v224454_8k.htm">all of the members of the Special Committee resigned</a>, the company terminated the forensic audit by PricewaterhouseCoopers, and at least one independent director resigned as well. MaloneBailey finally resigned as the company's auditor on May 31, stating "management’s unwillingness to take appropriate actions" and "an unwillingness to cooperate with the Securities & Exchange Commission and Nasdaq." The Chief Financial Officer left the company on the same day, and the Chairman of the Audit Committee followed on June 3. CELM was subsequently delisted from NYSE Amex and is trading on the pink sheets since June 14, 2011.<br /><br /><b>China Integrated Energy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CBEH.PK">CBEH.PK</a>) is currently trading at $0.69, down 90.59% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 6% (Extreme Risk).<br /><br />Biodiesel maker China Integrated has been accused of significantly overstating its revenue and profits. The company's auditor, KMPG, first signed off on CBEH's annual report for 2010, then shortly after withdrew its opinion and resigned on April 26, stating that it is no longer able to "rely on management’s representations in connection with its 2010 audits of the consolidated financial statements and the effectiveness of internal control over financial reporting of the company." China Integrated launched an investigation into these matters, but on April 28 its CFO resigned and shortly after, on May 3, <a href="http://www.sec.gov/Archives/edgar/data/1070045/000114420411025962/v220799_ex17-1.htm">a member of the audit committee left the company</a>, saying that "recent events, including but not limited to the inconsistencies between representations made by CBEH’s management to the Board of Directors, have eroded my confidence." The company has since hired a new director and CFO and says it "<a href="http://www.sec.gov/Archives/edgar/data/1070045/000114420411038504/v227151_8k.htm">remains committed to identifying and engaging a new auditor as soon as possible</a>." The stock has been delisted from Nasdaq on June 15 and is now quoted on the pink sheets.<br /><br /><b>China Intelligent Lighting</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CILE.PK">CILE.PK</a>) is currently trading at $0.11, down 95.85% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 6% (Extreme Risk).<br /><br />When CILE's auditor (MaloneBailey) resigned on March 24, it <a href="http://www.sec.gov/Archives/edgar/data/1421525/000114420411018048/v216502_8k.htm">gave to protocol</a> that it found "accounting fraud involving forging of the Company's accounting records and forging bank statements, in addition to other discrepancies identified during its testing of the Company’s accounts receivable." The Chairman of the Audit Committee resigned on the same day. China Lighting's stock was delisted from NYSE Amex on June 20 and is currently quoted on the pink sheets. It should be noted that the company hired Friedman LLP as its new auditor shortly after MaloneBailey's resignation (see also NIVS). <br /><br /><b>China MediaExpress</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CCME.PK">CCME.PK</a>) is currently trading at $1.60, down 89.90% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 0% (Extreme Risk).<br /><br />The CCME story is well-documented and I don't have to go into details again. The company lost its auditor, CFO, Chairman of the Audit Committee and independent directors through resignations in March and April, and has not hired any replacements since. It is unclear if the special committee that was formed on March 17 is still working on the internal investigation into the accounting matters, as the company has not updated the investment community in the past four months. CCME has been delisted from Nasdaq on May 19, 2011.<br /><br /><b>HQ Sustainable Maritime Industries</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HQSM.PK">HQSM.PK</a>) is currently trading at $0.24, down 94.97% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 9% (Extreme Risk).<br /><br />HQSM's auditor could not confirm the cash balances in the company's bank accounts nor verify the existence of customers in China. In its <a href="http://www.sec.gov/Archives/edgar/data/857073/000119312511164810/dex161.htm">resignation letter</a> dated May 26, the auditor claimed HQSM's management resisted its efforts to address these issues and became "increasingly non-responsive, uncooperative and non-communicative." The <a href="http://www.sec.gov/Archives/edgar/data/857073/000119312511157261/d8k.htm">company's account of what happened</a> paints a different picture. As of July 1 the company has only one independent director left, <a href="http://www.sec.gov/Archives/edgar/data/857073/000119312511182901/d8k.htm">all the others resigned</a>, including the Chairman of the Audit Committee. The SEC has initiated a formal investigation into HQSM. On July 11 the stock was delisted from NYSE Amex to the pink sheets after having been halted since April.<br /><br /><b>NIVS IntelliMedia Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=NIVS.PK">NIVS.PK</a>) is currently trading at $0.35, down 84.52% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 0% (Extreme Risk).<br /><br />In its resignation letter on March 24, the company's auditor, MaloneBailey, said it found "illegal acts involving the Company’s accounting records and bank statements and discrepancies in accounts receivable." NIVS managed to engage BDO China as its new auditor shortly after, but on May 14 they resigned as well, stating the company's inability to provide "certain critical financial related documents and records." Since May 19, Friedman is the company's independent auditor, we will see how long that lasts... The special committee that was formed to look into the accounting issues broke apart on July 11 when two directors, incl. the committee's chairman, the legal counsel, and the accounting advisors (Deloitte) all resigned or terminated their engagements. The company has since hired new directors and said it "<a href="http://www.sec.gov/Archives/edgar/data/1403795/000114420411040611/v228680_8-k.htm">intends to engage new counsel and forensic auditors to continue its work</a>." The stock has been delisted from NYSE Amex on June 24 and is since trading on the pinks.<br /><br /><b>Puda Coal</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=PUDA">PUDA</a>) is halted since April 11. Last reported trade was at $6.00, but the stock will likely open significantly lower when trading resumes. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 6% (Extreme Risk).<br /><br />Apparently, the chairman of Puda Coal <a href="http://alfredlittle.com/2011/04/08/puda-coal-chairman-secretly-sold-half-the-company-and-pledged-the-other-half-to-chinese-pe-investors/">stole almost the entire company from U.S. shareholders</a>, sold half of it to Chinese investors, and pledged the other half as security for a loan at 14.5%(!). The company has basically admitted fraud by stating that "although the investigation is in its preliminary stages, evidence supports the allegation that there were transfers by Mr. Zhao in subsidiary ownership that were inconsistent with disclosure made by the Company in its public securities filings." The stock has been halted since April 11 and the company completely ignored the due date for its first quarterly report of 2011. PUDA's independent auditor for six years, Moore Stephens Hong Kong, <a href="http://www.sec.gov/Archives/edgar/data/1162747/000114420411040405/v228497_ex7-1.htm">resigned on July 7</a>, which makes it very unlikely that the stock will reopen again on NYSE Amex. <br /><br /><b>ShengdaTech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SDTH.PK">SDTH.PK</a>) is currently trading at $0.53, down 89.19% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 13% (Extreme Risk).<br /><br />When ShengdaTech failed to timely file its annual report for 2010 the stock was halted by Nasdaq. Shortly after it came to light that SDTH's auditor, KPMG, found "serious accounting and operational issues," and informed the exchange of "<a href="http://www.sec.gov/Archives/edgar/data/1160165/000114420411024916/v220088_8k.htm">deliberate and ongoing efforts of the company’s Chief Executive Officer and Acting Chief Financial Officer to obstruct an internal investigation into these matters</a>." The Acting CFO resigned on April 21, followed by the auditor on April 29. KMPG was replaced by Marcum Bernstein & Pinchuk on June 9, however a final engagement is still pending satisfactory completion of Marcum's new client acceptance procedures. For the past six weeks no new developments regarding the status of investigation and auditor have been filed, and the stock has been delisted and is trading on the pink sheets since June 10, 2011.<br /><br /><b>Subaye</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SBAY.PK">SBAY.PK</a>) is currently trading at $0.49, down 95.02% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 0% (Extreme Risk).<br /><br />In my opinion this is the most outrageous of all the Chinese frauds, it is almost comical. If you are interested in a bit of cheerful entertainment you really should dig into the Subaye story - it claimed to be an entertainment company after all. Subaye is currently at its third CFO since March, its CEO resigned in May, its auditor in April and hasn't been replaced since. The stock has been delisted on June 24, and is now trading on the pink sheets.<br /><br />Just one snippet to illustrate all this craziness: Subaye's last official guidance, presented in December 2010, called for earnings per share of exactly $3.12 in FY2011. If the company were not blatantly lying, a P/E of 5 were justified and the stock would be worth at least $15, a level it reached briefly in January of the current year. Now the <a href="http://www.sec.gov/Archives/edgar/data/1139570/000114420411033637/v224758_ex10-2.htm">employment agreement with SBAY's newest CFO</a>, Jacqueline Ng, dated June 1, guarantees her the following compensation: an annual salary of $60,000, a sign-on bonus of 150,000 shares, and a minimum annual bonus of 100,000 shares of common stock. That means CFO No.3 Miss Ng would receive stock worth at least $3.75 million additionally to her annual salary as compensation for her CFO duties, if the company's representation of its net profits and prospects would have any credibility. Even at the current stock price her compensation is outrageously high. She's not alone, though. In the same filing it was revealed that SBAY's new CEO, a German national who seems to be in the IR business and doing side-jobs like serving as honorary consul for the Republic of Belize in Germany, will receive the same 250,000 shares plus $80,000 annual salary.<br /><br /><b>Wonder Auto Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">WATG</a>) is halted since May 9. Last reported trade was at $5.42, but the stock will likely open significantly lower when trading resumes. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 26% (Extreme Risk).<br /><br />When WATG failed to file its 2010 annual report, the company announced an internal investigation into reported accounting matters, incl. that it had engaged in several transactions without properly disclosing their related-party nature. Intermediate results led to announced restatements for fiscal years 2008, 2009 and 2010, and for the quarters ended March 31, June 30 and September 30, 2009 and 2010. This investigation was originally expected to conclude by the end of July, but that is now a very unlikely outcome. On July 12, <a href="http://www.sec.gov/Archives/edgar/data/1162862/000114420411040782/v228835_8k.htm">both the CEO and CFO resigned</a> from their positions without giving a reason. Wonder Auto's auditor, Big Four firm PricewaterhouseCoopers, is apparently still with the company. Trading in the Nasdaq-listed stock has been halted for ten weeks now, and at this point it is very unlikely that it will reopen on the big boards again.<br /><br /><b>Yuhe International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=YUII.PK">YUII.PK</a>) is currently trading at $0.97, down 89.17% for the year. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 0% (Extreme Risk).<br /><br />Chicken breeder Yuhe International claimed to have acquired 13 breeder farms from a competing business in 2009, but an <a href="http://www.geoinvesting.com/companies/duediligence/YUII_Report06132011.aspx/t_blank">investigatory report</a> from <a href="http://www.geoinvesting.com/">Geoinvesting</a> proved those claims wrong and the company was lying to investors. YUII's auditor resigned on June 17 due to "management’s misrepresentation and failure to disclose material facts surrounding certain acquisition transactions and off-balance sheet related party transactions." The stock was delisted from Nasdaq on July 21, and is since trading on the pink sheets.<br /><br /><b>Jiangbo Pharmaceuticals</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=JGBO">JGBO</a>) is halted since May 31. Last reported trade was at $3.08, but the stock will likely open significantly lower when trading resumes. The Trading China Tracker Score is UNDER REVIEW, the Trading China Safety Score is 14% (Extreme Risk).<br /><br />The Securities and Exchange Commission subpoenaed the company on March 26 and Jiangbo's audit committee started an internal investigation of the issues raised by the SEC. Elsa Sung, Jiangbo's CFO, resigned on March 31. On June 6, the independent members of the Audit Committee jointly resigned, stating that JGBO's "chairman and members of his management team have exhibited repeatedly their unwillingness to cooperate in even the most basic requests," and - among other things - the investigation "raised serious concerns regarding the veracity or correctness of banking information provided by the company."<br /><br />Michael Marks, former independent director and Chairman of JGBO's Audit Committee filed <a href="http://www.sec.gov/Archives/edgar/data/1091164/000114420411034429/v225152_ex99-4.htm">a very long (22 pages) and detailed account of the internal investigation</a> with the SEC. If you are interested in the troubles of U.S.-listed Chinese companies, you should take the time to read the full letter. You will find real gems in there, such as the manager of Jiangbo's materials department refused to leave the employee wash room in order to avoid answering Ernst & Young's questions. Or that the law firm's fee was paid from a personal account of an individual who turned out to be Jiangbo's cashier - via internet banking - when Jiangbo previously told Ernst & Young that the company did not use and did not have access to internet banking.<br /><br />The stock remains halted on Nasdaq and will likely get delisted soon. Anyone out there who still believes this company has almost $150 million cash on the bank?<br /><br />This was a very long account of (likely) fraudulent Chinese stocks which blew up in the first half of 2011. But it is far from complete! I did not mention several other cases, including <b>Longtop Financial</b> (LFT), <b>Duoyuan Global Water</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=DGW">DGW</a>), or <b>A-Power Energy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=APWR">APWR</a>), and there are many stocks with similar problems that never made it to the big boards and are still quoted on the bulletin boards or pink sheets.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com14tag:blogger.com,1999:blog-6154015141484451605.post-23324063851464062822011-07-02T14:36:00.002+01:002011-07-02T14:40:48.068+01:00Second Quarter SummaryThe Second Quarter performance of small cap U.S.-listed Chinese stocks was even worse than the already terrible performance in the First Quarter. The sectorwide sell-off spread from reverse merger stocks and bulletin board quoted names to established Chinese companies and recent tier one IPOs. Only very few stocks managed to counter this trend and ended the quarter in green territory, mostly driven by company-specific news like going private initiatives (CSR, FTLK) or large investments as Tencent and Expedia buying a stake in eLong (LONG).<br /><br />Here are the highlights of the two indices we are tracking for China stocks. The Main Index holds the 40 largest exchange traded stocks with a market capitalization under $1 billion, while the China OTC Index tracks the 40 largest stocks on OTC Markets with reasonably liquid trading patterns; stocks like Tsingyuan Brewery (BEER) which traded under $500 for the last week of June are not eligible for the OTC Index.<br /><br /><a href="http://www.fixyou.co.uk/index_china_small.php"><b>Trading China Main Index</b></a><br /> - 571.36 (<span style="color: rgb(255, 0, 0);">down 24.74% for the Second Quarter</span>)<br /> - 8 stocks are up, 32 are down<br /><br />Top Five<ul> <li>eLong (LONG) <span style="color: rgb(0, 102, 0);">+68.81%</span></li> <li>China Kanghui Holdings (KH) <span style="color: rgb(0, 102, 0);">+33.63%</span></li> <li>Charm Communications (CHRM) <span style="color: rgb(0, 102, 0);">+19.98%</span></li> <li>SouFun Holdings (SFUN) <span style="color: rgb(0, 102, 0);">+16.18%</span></li> <li>China Security & Surveillance (CSR) <span style="color: rgb(0, 102, 0);">+14.25%</span></li></ul> Bottom Five<ul> <li>China New Borun (BORN) <span style="color: rgb(255, 0, 0);">-51.66%</span></li> <li>Puda Coal (PUDA) <span style="color: rgb(255, 0, 0);">-51.03%</span></li> <li>SinoTech Energy (CTE) <span style="color: rgb(255, 0, 0);">-49.50%</span></li> <li>ChinaCache International (CCIH) <span style="color: rgb(255, 0, 0);">-44.77%</span></li> <li>Mecox Lane (MCOX) <span style="color: rgb(255, 0, 0);">-44.39%</span></li></ul> <a href="http://www.fixyou.co.uk/index_china_otc.php"><b>Trading China OTC Index</b></a><br /> - 350.76 (<span style="color: rgb(255, 0, 0);">down 41.23% for the Second Quarter</span>)<br /> - 4 stocks are up, 35 are down, 1 unchanged<br /><br />Top Five<ul> <li>China Health Industries (CHHE.OB) <span style="color: rgb(0, 102, 0);">+209.80%</span></li> <li>Fuqi International (FUQI.PK) <span style="color: rgb(0, 102, 0);">+38.59%</span></li> <li>Deyu Agriculture (DEYU.OB) <span style="color: rgb(0, 102, 0);">+6.33%</span></li> <li>Asia Pacific Wire & Cable (APWC) <span style="color: rgb(0, 102, 0);">+1.46%</span></li> <li>AgriSolar Solutions (AGSO.OB) <span style="color: rgb(0, 102, 0);">+0.00%</span></li></ul> Bottom Five<ul> <li>China Executive Education (CECX.OB) <span style="color: rgb(255, 0, 0);">-77.56%</span></li> <li>Sen Yu International (CSWG.OB) <span style="color: rgb(255, 0, 0);">-75.00%</span></li> <li>China Shandong Industries (CSNHD.OB) <span style="color: rgb(255, 0, 0);">-65.00%</span></li> <li>Lotus Pharmaceuticals (LTUS.OB) <span style="color: rgb(255, 0, 0);">-52.78%</span></li> <li>China Energy Corporation (CHGY.OB) <span style="color: rgb(255, 0, 0);">-52.13%</span></li></ul> <b>But there is hope!</b><br /><br />While the OTC Index seems to be bottoming here, the Trading China Main Index has made a significant move in the past two weeks and gained 17.5% from the lows printed in mid-June. <br /><br /><img src="http://www.fixyou.co.uk/images/20110702_2.png" width="490" height="340" border="0"><br /><img src="http://www.fixyou.co.uk/images/20110702_1.png" width="490" height="340" border="0"><br /><b>Quarterly Revision (Second Quarter)</b><br /><br />Both China indexes are revised at the beginning of each quarter. Stocks that do no longer meet the requirements are being removed. Reasons could be posting a loss in the most recent quarter, uplisting to a higher exchange or just a huge decline in share price. Following is a list of all changes for both indexes.<br /><br /><a href="http://www.fixyou.co.uk/index_china_small.php"><b>Trading China Main Index</b></a><br /><br />Additions<ul> <li>21Vianet Group (VNET)</li> <li>Asia Entertainment & Resources (AERL)</li> <li>ATA Inc. (ATAI)</li> <li>China Dangdang (DANG)</li> <li>China Ming Yang Wind Power (MY)</li> <li>China Real Estate Information (CRIC)</li> <li>China Yuchai (CYD)</li> <li>China Zenix Auto (ZX)</li> <li>E-House (China) Holdings (EJ)</li> <li>iSoftStone Holdings (ISS)</li> <li>Jiayuan.com International (DATE)</li> <li>NetQin Mobile (NQ)</li> <li>Phoenix New Media (FENG)</li> <li>Taomee Holdings (TAOM)</li> <li>Xinyuan Real Estate (XIN)</li></ul> Removals<ul> <li>AirMedia Group (AMCN)</li> <li>Bona Film Group (BONA)</li> <li>China Hydroelectric (CHC)</li> <li>China New Borun (BORN)</li> <li>China TechFaith Wireless (CNTF)</li> <li>China XD Plastics (CXDC)</li> <li>China Xiniya Fashion (XNY)</li> <li>Cogo Group (COGO)</li> <li>eLong (LONG)</li> <li>Fushi Copperweld (FSIN)</li> <li>Lihua International (LIWA)</li> <li>Mecox Lane (MCOX)</li> <li>Puda Coal (PUDA)</li> <li>Sky-mobi Limited (MOBI)</li> <li>VisionChina Media (VISN)</li></ul> <a href="http://www.fixyou.co.uk/index_china_otc.php"><b>Trading China OTC Index</b></a><br /><br />Additions<ul> <li>China Agritech (CAGC.PK)</li> <li>China Bilingual Technology (CBLY.OB)</li> <li>China Integrated Energy (CBEH.PK)</li> <li>China MediaExpress (CCME.PK)</li> <li>ShengdaTech (SDTH.PK)</li> <li>Yayi International (YYIN.OB)</li></ul> Removals<ul> <li>Asia Pacific Wire & Cable (APWC, uplisted)</li> <li>China Pharmaceuticals (CFMID.OB)</li> <li>China Shandong Industries (CSNHD.OB)</li> <li>Eastern Environment Solutions (EESC.PK)</li> <li>GC China Turbine (GCHT.OB)</li> <li>Lotus Pharmaceuticals (LTUS.OB)</li></ul>The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com8tag:blogger.com,1999:blog-6154015141484451605.post-16445225380975061452011-06-13T10:20:00.002+01:002011-06-13T10:26:18.890+01:0049 China Stocks to be Dropped from Russell IndexesRussell Investments has announced a <a href="http://www.russell.com/indexes/tools-resources/reconstitution/reconstitution-changes.asp">preliminary list of additions and deletions</a> for the annual rebalancing of its family of indexes. As expected, the weight of U.S.-listed China stocks on these indexes will be much lower in 2011 than in previous years. As the main criterion for inclusion is total market capitalization, the steep sell-off in the sector has taken its toll.<br /><br />The most important of the Russell indexes, the Russell 2000, has lost almost all its China stocks by now. This year we have three deletions and zero additions. For the Russell Microcap Index we have two additions - NEP was not eligible last year, because at the time of index reconstitution the stock was halted by the exchange - and four deletions. And the Russell Global, the only one of the three that allows non-U.S. headquartered companies to be included, dropped 46 U.S.-listed China stocks, while only eight - most of them recent IPOs - have been added.<br /><br />The final reconstitution of these indexes will take place on Friday, June 24, after the market close. Until that day, Russell can make changes to this preliminary list.<br /><br /><b>Russell 2000 Additions</b> (U.S. Companies)<br /><br />None<br /><br /><b>Russell Microcap Additions</b> (U.S. Companies)<br /><br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=NEP">NEP</a> - China North East Petroleum<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=NEWN">NEWN</a> - New Energy Systems Group<br /><br /><b>Russell Global Additions</b><br /><br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNTF">CNTF</a> - China Techfaith Wireless Communication<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=ZX">ZX</a> - China Zenix Auto International<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=DQ">DQ</a> - Daqo New Energy<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=LONG">LONG</a> - eLong<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=FTLK">FTLK</a> - Funtalk China Holdings<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=QIHU">QIHU</a> - Qihoo 360 Technology<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=RENN">RENN</a> - Renren<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CTE">CTE</a> - Sinotech Energy<br /><br /><b>Russell 2000 Deletions</b> (U.S. Companies)<br /><br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=ABAT">ABAT</a> - Advanced Battery Technologies<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=AXN">AXN</a> - Aoxing Pharmaceutical<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CHINA">CHINA</a> - CDC Corporation<br /><br /><b>Russell Microcap Deletions</b> (U.S. Companies)<br /><br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CADC">CADC</a> - China Advanced Construction Materials<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNAM">CNAM</a> - China Armco Metals<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=HQS">HQS</a> - HQ Sustainable Maritime<br />UTSI - UT Starcom<br /><br /><b>Russell Global Deletions</b><br /><br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=APWR">APWR</a> - A-Power Energy Generation Systems<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=ABAT">ABAT</a> - Advanced Battery Technologies<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=AMCN">AMCN</a> - Airmedia Group<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=AMBO">AMBO</a> - Ambow Education Holding<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=AOB">AOB</a> - American Oriental Bioengineering<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=AXN">AXN</a> - Aoxing Pharmaceutical<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CHINA">CHINA</a> - CDC Corporation<br />CPC - Chemspec International<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CHBT">CHBT</a> - China-Biotics<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CAAS">CAAS</a> - China Automotive Systems<br />CO - China Cord Blood<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CFSG">CFSG</a> - China Fire & Security Group<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CHOP">CHOP</a> - China Gerui Advanced Materials Group<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CGA">CGA</a> - China Green Agriculture<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CHC">CHC</a> - China Hydroelectric<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CNIT">CNIT</a> - China Information Technology<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CBEH">CBEH</a> - China Integrated Energy<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=BORN">BORN</a> - China New Borun<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CSKI">CSKI</a> - China Sky One Medical<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CVVT">CVVT</a> - China Valves Technology<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CXDC">CXDC</a> - China XD Plastics<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=XNY">XNY</a> - China Xiniya Fashion<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=COGO">COGO</a> - Cogo Group<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=DEER">DEER</a> - Deer Consumer Products<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=DGW">DGW</a> - Duoyuan Global Water<br />EDS - Exceed<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=ADY">ADY</a> - Feihe International<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=FSIN">FSIN</a> - Fushi Copperweld<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=GEDU">GEDU</a> - Global Education & Technology<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=GFRE">GFRE</a> - Gulf Resources<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=CTC">CTC</a> - Century 21 China Real Estate<br />JST - Jinpan International<br />KONG - Kongzhong<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=LIWA">LIWA</a> - Lihua International<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=MCOX">MCOX</a> - Mecox Lane<br />SEED - Origin Agritech<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=SHP">SHP</a> - Shangpharma<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=SDTH">SDTH</a> - Shengdatech<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=SCOK">SCOK</a> - Sinocoking Coal & Coke<br />SVA - Sinovac Biotech<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=HEAT">HEAT</a> - Smartheat<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=SORL">SORL</a> - Sorl Auto Parts<br />UTSI - UT Starcom<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">WATG</a> - Wonder Auto Technology<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=WH">WH</a> - WSP Holdings<br /><a href="http://www.fixyou.co.uk/tracker_details.php?s=XIN">XIN</a> - Xinyuan Real EstateThe Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com12tag:blogger.com,1999:blog-6154015141484451605.post-22805454926667720272011-06-03T10:31:00.001+01:002011-06-03T10:32:40.993+01:00Auditors Not Licensed to do Fieldwork in China?A <a href="http://www.sec.gov/Archives/edgar/data/857073/000119312511157261/d8k.htm">stunning Form 8-K</a>, filed last night by currently halted Chinese food company <b>HQ Sustainable Maritime Industries</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HQS">HQS</a>), suggests that most U.S.-based auditors of Chinese companies are not even allowed to perform the necessary fieldwork, if they are not officially licensed to conduct auditing services in China. The text explicitly mentions "collection of information directly from the sources of such information, such as vendors, customers and financial institutions."<blockquote><br />During the course of the audit work relating to the Company's consolidated financial statements for the fiscal year ended December 31, 2010, the Company learned that <b>Schwartz Levitsky Feldman LLP (SLF) was not licensed to provide auditing services for the Company and its PRC subsidiaries in the People's Republic of China</b> (the PRC). This information came to the Company's attention when SLF insisted upon application of certain heightened, more stringent procedures than those utilized by SLF in prior audits of the Company's financial statements. <b>Specifically, those procedures related to confirmation and verification procedures that involved the collection of information directly from the sources of such information, such as vendors, customers and financial institutions in connection with the 2010 audit work. SLF's attempt to implement these new direct collection procedures raised the issue of SLF's lack of PRC licensing since such licensing is a legal pre-requisite for direct collection of information in connection with an audit in the PRC</b>.<br /><br />The Company also learned that <b>the PRC Ministry of Finance has reconfirmed its policies regarding the performance of fieldwork by foreign auditing firms auditing the financial statements of companies with operations in the PRC</b>. The PRC rules and regulations governing licensing matters require, among other things, that foreign accounting firms obtain administrative permits to conduct auditing services in the PRC, comply with PRC laws regulating the confidentiality and secrecy of information, and <b>keep audit working papers within the PRC</b>. Violators of the foregoing requirements could be subject to legal sanctions in the PRC, ranging from fines and suspension of business licenses to criminal prosecution. Notwithstanding repeated inquiries by the Company, SLF neither confirmed nor denied that it was not properly licensed to provide auditing services in the PRC.<br /><br />As an alternative to SLF's more stringent confirmation procedures and a safeguard against violating applicable PRC rules and regulations, the Company proposed that SLF and the Company employ certain "chain of custody" procedures in the confirmation and verification procedures to be utilized in the audit, which the Company believed would satisfy Generally Accepted Auditing Standards. Those proposed procedures involved the proposed collection of the requisite information by the Company in the presence of SLF. Notwithstanding SLF's initial agreement to utilize such procedures, SLF subsequently and without explanation elected not to utilize this alternative and reverted to its demand to utilize the more stringent confirmation procedures. Thereafter in early May 2011, SLF requested that the Company (and its subsidiaries') provide certain written representations to be submitted by SLF to the PRC Ministry of Finance in connection with an application SLF intended to make for a Temporary Practice Permit for Offshore Accounting Firm in accordance with the <b>PRC Ministry of Finance's Interim Provisions on Temporary Auditing Business Activities Carried Out in China Mainland by Offshore Accounting Firms</b>. The Company and SLF apparently have conflicting understandings of those regulations. The Company believes that the subject legal scheme precludes SLF from obtaining such a temporary permit by virtue of SLF's prior activities in the PRC, and the Company has continued to press SLF to utilize alternative procedures. SLF disagreed with the Company's view of that regulatory scheme. If the Company's assessment is correct, the written support that SLF requested that the Company (and its subsidiaries) provided could have subjected the Company to administrative sanctions in the event that the PRC authorities determined that SLF engaged in unpermitted auditing business activities in Hainan Province. The Company, therefore, declined to provide the written authorizations sought by SLF. Subsequently on May 26, 2011, SLF tendered its resignation letter filed as an exhibit to this Current Report.</blockquote>This is the company's account of the situation, and I haven't confirmed this with a third party. However, if this representation is correct, then it further devalues the opinion of any small U.S.-based accounting firm providing services for U.S.-listed Chinese companies. We can safely assume that not even basic fieldwork, like <b>confirming the cash balance directly and independently with a Chinese bank</b>, could have been performed if the firm is not licensed to work as an auditor in the PRC. Furthermore, if Chinese law demands that audit working papers are to be kept within China, then an American accounting firm with no direct presence (offices) in China will have a hard time to comply. <br /><br />HQS was the only remaining Chinese client of Ontario-based Schwartz Levitsky Feldman, but in the past the firm was registered as the auditor for more Chinese firms, including <b>China Botanic Pharmaceutical</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CBP">CBP</a>) and <b>China Automotive Systems</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAAS">CAAS</a>). China Automotive replaced SLF last December with PricewaterhouseCoopers, since the day of PwC's engagement the stock lost 53% of its value. You can use our <a href="http://www.fixyou.co.uk/tracker_auditors.php">comprehensive list of auditors for U.S.-listed Chinese companies</a> to find other names that currently use small U.S.-based accounting firms.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com30tag:blogger.com,1999:blog-6154015141484451605.post-88762356029309333692011-05-30T13:54:00.002+01:002011-05-30T14:01:22.521+01:00A Short History of Short Attacks, Part Two<b>China Marine Food Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CMFO">CMFO</a>) has come under pressure from short sellers several times throughout 2010. A person posting under the alias "Chinese Company Analyst" on <a href="http://seekingalpha.com/author/chinese-company-analyst">Seeking Alpha</a> repeatedly called the company a fraud: "The main thrust of our argument that CMFO is a fraud is that the Company's SAIC and SEC filings don't match." (<a href="http://seekingalpha.com/instablog/659080-chinese-company-analyst/74115-china-marine-food-there-s-something-fishy-going-on">June 1, 2010</a>) and "Investors ... should be concerned about whether ZYCPA is actively aiding China Marine Food management in falsifying its SEC financial statements." (<a href="http://seekingalpha.com/article/210294-china-marine-food-group-auditor-s-role-in-another-alleged-fraud">June 16, 2010</a>). <br /><br /><a href="http://www.fixyou.co.uk/tracker_auditor_details.php?s=ZYCPA">ZYCPA</a>, China Marine Food's auditor at that time, is a small Hong Kong firm that has several U.S.-listed clients, including <b>NF Energy Savings</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=NFEC">NFEC</a>) and <b>China Sun Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CSGH.OB">CSGH</a>). The firm had repeatedly been accused of participating in alleged frauds, and whenever that happened the auditor changed its name: from Zhong Yi (Hong Kong), to ZYCPA, and now they use the moniker "HKCMCPA" - the original firm is no longer recognizable. China Marine Food engaged BDO China as its new auditor in October 2010 and is no longer connected with ZYCPA/HKCMCPA.<br /><br />Another Seeking Alpha author attacking the company was Chimin Sang, when he <a href="http://seekingalpha.com/article/209881-china-marine-food-group-where-did-your-money-go">wrote in June 2010</a> that CMFO's "business itself is nearly impossible. It has $400 fixed assets, little inventory, zero finished product inventory, but it has a magic ramp-up of sales." None of those attacks had an immediate effect on CMFO's stock price. The stock traded in a relatively narrow range for the remainder of 2010, and closed the year unchanged from the levels of mid-June. However, the performance for 2011 is terrible and CMFO printed new lows this Friday, to close at $2.92, <b>down 45.93% for the year</b>.<br /><br /><a href="http://www.muddywatersresearch.com/">Muddy Waters Research</a>, perhaps the most famous of all China short-selling outfits, <a href="http://www.muddywatersresearch.com/research/orient-paper-inc/initiating-coverage-onp/">emerged on June 28, 2010</a>, with its initial "Sell Short" report on <b>Orient Paper</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=ONP">ONP</a>): "We are confident that ONP is a fraud. Its purpose is to raise and misappropriate tens of millions of dollars." The company <a href="http://www.globalpapermoney.org/orient-paper-responds-to-muddy-waters-short-position-claim-cms-4765">swiftly responded</a> by stating that it "categorically denies these allegations and has instructed its legal counsel to contact Muddy Waters and explore all legal options against it for publishing and distributing such a report." However, the stock lost some 20% of its value within three days from the release of Muddy Waters' report.<br /><br />A whole battalion of short sellers jumped on Muddy Waters' bandwagon and published further attacks over the next few weeks. Again we have "Chinese Company Analyst" - whose <a href="http://chinesecompanyanalyst.com/">website</a> is no longer active today - <a href="http://seekingalpha.com/article/213213-orient-paper-not-all-bdos-are-the-same">questioning the integrity of Orient Paper's auditors BDO Limited</a>, the Hong Kong member firm of BDO International. He also <a href="http://seekingalpha.com/article/214639-orient-paper-key-pieces-of-evidence-for-fraud">published another article</a> where he claims to "provide compelling evidence that Orient Paper is falsifying its financial statements." And Chimin Sang, a very vocal China bear who posted <a href="http://seekingalpha.com/author/chimin-sang/articles">negative articles</a> on a growing number of Chinese reverse mergers (FUQI, CCME, CHBT, ZSTN, SCEI), <a href="http://seekingalpha.com/article/220175-orient-paper-inconsistent-record-keeping-raises-red-flags">meant to let the world know</a> that he "side[s] with Muddy Waters: ONP has more likely than not committed fraud."<br /><br />Orient Paper initiated an internal investigation of these fraud allegations, which, according to the company, did not find any evidence for fraud. Drew Bernstein, the head of ONP's audit committee and a partner in the New York-based accounting firm Marcum Bernstein & Pinchuk, <a href="http://blogs.barrons.com/stockstowatchtoday/2010/11/29/onp-audit-committee-head-speaks-waiting-on-muddy-waters/">concluded that</a>: "When you look at Muddy Waters' allegations in totality, you'd have to say they are false." He said that ONP is "<a href="http://hk.us.biz.yahoo.com/rb/110512/business_us_china_shortsellers.html?.v=2">by now perhaps the most vetted company in China</a>."<br /><br />Muddy Waters hasn't admitted defeat, instead they <a href="http://hk.us.biz.yahoo.com/rb/110512/business_us_china_shortsellers.html?.v=2">questioned the validity of the company's internal investigation</a>. And Orient Paper's share price? The stock recovered nicely after the investigation concluded, yet it is now trading at lower levels than any time in 2010, printing new lows last week and sitting on a <b>44.34% loss for the year</b>.<br /><br /><a href="http://sharesleuth.com/">Sharesleuth</a> picked on Chinese telecom equipment company <b>Telestone Technologies</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=TSTC">TSTC</a>) in an <a href="http://sharesleuth.com/shorttakes/2010/08/small-growth-company-has-big-r/">article published on August 11, 2010</a>. The article focused on TSTC's growing accounts receivable issue and concluded that "investors who are considering the company because of its sharp increase in sales and earnings and its attractive profit margins might want to know more about the underlying numbers." The article was explicitly "not alleging any wrongdoing by Telestone," but it set the tone for further negative articles this winter.<br /><br />On January 10, 2011, <a href="http://seekingalpha.com/instablog/790526-theforensicfactor/127314-telestone-technologies-a-rino-in-sheep-s-clothing">The Forensic Factor called Telestone "a RINO in sheep's clothing,"</a> stating that they are "nearly convinced that Telestone has misrepresented its prospects, size, and business to the investment community." TSTC <a href="http://www.mzcan.com/us/TSTC/irwebsite/index.php?mod=announcements">swiftly rejected all allegations</a> and called the article "an unjustified swipe at a reputable and successful Chinese business." The Forensic Factor remained unimpressed and posted a follow-up two weeks later with the telling title <a href="http://seekingalpha.com/instablog/790526-theforensicfactor/132677-telestone-technologies-part-ii-the-great-wall-of-deceit">"The Great Wall of Deceit"</a>.<br /><br />TSTC suffered its steepest losses in 2010 already, when the share price was roughly cut in half. Most of these losses can in fact be attributed to the accounts receivable issues, unrelated to any specific short-selling attack. For 2011 the stock is down 29.67%, yet it has <b>recovered almost 50% from its early April low</b>. It is one of the very few Chinese reverse merger stocks that seems to be in an uptrend for the past four weeks. But TSTC is not for the faint of heart, the <a href="http://www.fixyou.co.uk/tracker_srm.php?s=TSTC">Trading China Risk Model</a> suggests that this is one of the highest risk stocks in the China small caps universe.<br /><br />To be continued...The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com9tag:blogger.com,1999:blog-6154015141484451605.post-70992683106499632002011-05-28T12:58:00.003+01:002011-05-28T13:02:43.548+01:00A Short History of Short Attacks, Part OneIt all started with <a href="http://www.waldomushman.com/">John Bird a.k.a. Waldo Mushman</a>, one of the most vocal figures in the growing circle of short sellers targeting Chinese stocks. In early August of 2009 Bird proclaimed the TCM (Traditional Chinese Medicines) company <b>China Sky One Medical</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CSKI">CSKI</a>) a fraud: "Based on the massively inflated and inconsistent numbers, I have come to believe that China Sky One Medical is actively committing fraud." Over the next 12 months, Bird reiterated his call numerous times, on any platform or message board he found his way to. <br /><br />The company responded with press releases and denied all allegations. In one of those attempts (<a href="http://www.cski.com.cn/english/newsshow.asp?hid=848">July 23, 2010</a>) "the management of China Sky One Medical reminded investors that Waldo Mushman was misleading investors by counterfeiting SAIC documents and posting them on its website and other blogs." It did not help them. <b>The stock lost 81.63% of its value since John Bird's initial call</b>, so we can safely assume that he made a good chunk of money with his short position.<br /><br />Bird got help from other short sellers. On February 21, 2010, Manuel Asensio accused CSKI on <a href="http://seekingalpha.com/article/189692-government-wises-up-to-china-sky-one-places-ban-on-products">Seeking Alpha</a> of not disclosing material information: "The Chinese government order to stop selling eight of CSKI's products seems to be material to CSKI's operating condition, yet CSKI has provided no disclosure of the order to U.S. investors." In a similar vein, <a href="http://www.thefinancialinvestigator.com/?p=166">The Financial Investigator</a> blogged on August 4, 2010, that "China Sky One did not disclose the receipt of its own subpoena in its filings nor did it reference that its auditors had received one." At that time the Securities and Exchange Commission had issued subpoenas to China Sky One Medical and its auditors, MSPC. And roughly one month later, <a href="http://www.thestreetsweeper.org/undersurveillance.html?i=1089">The Street Sweeper</a> published on its website that "MSPC is a past target of securities regulators that has since come under fire for allegedly approving flawed financial reports issued by CSKI itself."<br /><br />China Sky One is still trading on Nasdaq at the time of writing. Yet the stock price is in a constant decline. From $22.75 at the end of 2009, the stock closed at $6.97 one year later, and now you can buy it for just $2.83. At Friday's close, CSKI is down 59.40% for the year.<br /><br />The next target on our list of short attacks is <b>L&L Energy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=LLEN">LLEN</a>), a U.S.-based coal mining company with the majority of its operations in China. On January 11, 2010, <a href="http://www.thestreetsweeper.org/undersurveillance.html?i=1500">The Street Sweeper</a> portrayed LLEN as a "relatively new Chinese coal miner accused of misleading investors in the past, [that] has managed to become a stock-market winner by posting some of the most incredible numbers recorded in the entire industry."<br /><br />The stock kept rising into summer until <a href="http://www.cnbc.com/id/40769682">Herb Greenberg used his platform on CNBC</a> to repeatedly attack the company and its Chief Executive Officer: "CEO and founder Dickson Lee was fined $65,000 by FINRA and banned from the securities industry for a year." Greenberg's attacks on live television sent the stock lower. From $11.05 at the time of the first broadcast (December 21, 2010), <b>LLEN dropped 44.53%</b> to close at $6.13 last Friday. The stock is down 43.25% for the year, but it has recovered some from its all-time lows, printed in early April at $4.29.<br /><br />On January 26, 2010, a short-selling outfit named "<a href="http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=tm&bn=76589&tid=965&mid=973&tof=20&rt=2&frt=2&off=1">Worthless Pennies</a>" called out pharmaceutical company <b>China Biologic Products</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CBPO">CBPO</a>). "The urgent warning we have for investors today is that the background check and evidence we collected clearly prove direct ties between CBPO management/directors and convicted criminals who exercise control of the company, a criminal background of the CEO of its operating subsidiary and a history of laundering money stolen from investors, none of which the company disclosed in its filings." That call was initially very successful and sent CBPO 25.94% lower on the day of its release. <br /><br />China Biologic <a href="http://www.chinabiologic.com/IR.asp?MID=47&NID=173">reacted three weeks later</a> by announcing a thorough internal investigation and stating that "the Company believes that this is an attempt to discredit the Company's management and disrupt the Company's business and operations." In December 2010 the company informed investors that "the Special Committee of its Board of Directors has completed its investigation of several allegations that appeared on certain financial websites in January 2010." CBPO's strategy was highly successful as the stock has more than doubled since the Special Committee was formed on February 17, 2010. It moved from $7.62 to $16.10 for <b>a gain of 111.28%</b>, and CBPO is one of the very few Chinese reverse mergers the market has not punished yet - the stock has gained 33.27% since the beginning of 2010, while most of its RTO peers have been thrown into the stock dumpster. The "Worthless Pennies" outfit seems to have closed its doors, and its website does no longer exist.<br /><br /><a href="http://www.citronresearch.com/index.php/2010/03/11/sinocoking-nasdaqscok-follow-the-money/">Citron Research's first target</a> in the China small caps universe was newly uplisted <b>SinoCoking Coal and Coke Chemical Industries</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SCOK">SCOK</a>) on March 11, 2010. Citron called it "an ugly duckling Chinese coal deal with an utterly improbably rise and ridiculously unsustainable run-up." The stock was subsequently destroyed, dropping from $34.09 at the time of Citron's report to $5.93 last Friday, <b>a loss of 82.61%</b>. <br /><br />Another attack on SCOK was <a href="http://sharesleuth.com/shorttakes/2010/09/the-shares-of-sinocoking-coal/">launched by Sharesleuth</a> on September 13, 2010. The author, Chris Carey, wrote "that no fewer than eight people who participated in [SinoCoking's share] placement have been the subject of Securities and Exchange Commission actions or criminal prosecutions." The stock is <b>down 50.46% year-to-date</b> and fails the <a href="http://www.fixyou.co.uk/tracker_srm.php?s=SCOK">Trading China Safety/Risk Model</a> with an "Extreme Risk" score.<br /><br /><b>Lihua International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=LIWA">LIWA</a>), a company that sells wire produced from refined scrap copper, was repeatedly a short seller target. On May 9, 2010, Seeking Alpha published a Steven R. Chapski article stating that "in order for the SEC financial statements to be correct, LIWA paid the Chinese government $4 million for income taxes in 2009, yet reported $0 in profit tax to the same Chinese government on their SAIC financial reports." The company <a href="http://www.lihuaintl.com/PDF/pdfurl/05.24.10%20Lihua%20Business%20Update%20Final.pdf">responded two weeks later</a> by providing its most recent SAIC documents on its website and "proving" that these results were consistent with those reported in the company's SEC filings. <br /><br />Chapski didn't back off, though. In December he <a href="http://seekingalpha.com/article/242255-lihua-financial-reports-raise-questions">posted another article</a>, insisting that in his belief "the SEC financial statements continue to be wrong." None of those reports had any permanent effect on LIWA's stock price. <b>The stock closed 2010 with a 7.5% gain</b>, and has only recently come under pressure, consistent with its Chinese reverse merger peers. For the year of 2011, LIWA is now down 33.9%, and the stock's short ratio has spiked to 25.65% of the float.<br /><br />To be continued...The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com8tag:blogger.com,1999:blog-6154015141484451605.post-28272798693128704362011-05-23T11:05:00.000+01:002011-05-23T11:08:12.185+01:00China Tracker: New FeaturesOver the past four weeks we have added several new tools to the Trading China Tracker. The focus is on risks associated with investments in U.S.-listed Chinese stocks. It is <u>absolutely crucial</u> for any China investor to thoroughly assess the risks before making an investment decisions. These tools should work as a starting point for your research.<br /><br /><b>Safety/Risk Model</b><br /><br />We have introduced a two-stage safety/risk model for U.S.-listed Chinese stocks. Stage One is based on publicly available information, Stage Two requires independent research and can not be automatized. <br /><br />For every stock we are covering on Trading China, you can now find an additional score card for the Safety/Risk Model (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=CVVT">Example: CVVT</a>). All the data is compiled into a percentage score that indicates the safety level according to our algorithm. Please keep in mind that this is not meant to be the ultimate truth - it is based on Stage One of the model only - but it will provide a good starting point for your research into the validity of the reported financials, corporate governance issues, and the possibility of fraud.<br /><br />The following data is compiled on this page and used to determine the safety score for this particular stock:<ul><li>Market Segment (Nasdaq, NYSE, Amex, OTC, Pink Sheets)</li> <li>Type of Going Public (Reverse Merger, IPO, Direct Offering, SPAC, etc.)</li> <li>IPO Lead Underwriter (if applicable)</li> <li>Auditor</li> <li>Auditor History and Trail (Dismissals, Resignations, Engagements)</li> <li>Effectiveness of Internal Controls (Management Assessment)</li> <li>Effectiveness of Internal Controls (Auditor Opinion)</li> <li>Senior Management Changes (past two years)</li> <li>CFO History and Trail (Dismissals, Resignations, Appointments)</li> <li>Ownership (Controlling Shareholder)</li> <li>Analyst Coverage (Quality of Coverage, Backing)</li> <li>Shareholder Dilution (past 12 months)</li> <li>Short Interest</li> <li>Account Receivables (Balance Sheet)</li> <li>Delinquency with periodical SEC Filings</li> <li>Reported Corporate Governance Issues (also Trading Halts)</li> <li>Recent Short Seller Attacks / Reports</li><li>Detailed Fraud Accusations</li></ul>The Safety Score is translated into a Safety Label which spans a range from "Extreme Risk" (Score under 30%), over "High Risk" (30% - 50%), "Moderate Risk" (50% - 75%), "Moderate Safety" (75% - 90%), to "High Safety" (Score over 90%). Ideally, all the stocks you want to invest your money in - as in "buy and hold" and contrary to short-term trades - should be labeled with "Moderate Safety" or higher. For all other names you are strongly advised to do your homework before taking any position. Please keep in mind that, with the exception of Account Receivables data, the safety score has nothing to do with reported financials. <br /><br />From our coverage universe, the companies with the highest safety score are Ctrip.com International (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=CTRP">CTRP</a>), E-House (China) Holdings (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=EJ">EJ</a>), and 3SBio Inc. (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=SSRX">SSRX</a>). A total of 24 Chinese stocks passed the Safety/Risk Test with a "High Safety" label, and another 20 names scored with "Moderate Safety". Among those 44 companies you will find only two that went public via Reverse Merger, Cogo Group (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=COGO">COGO</a>) and American Oriental Bioengineering (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=AOB">AOB</a>). <br /><br />A total of 146 stocks failed the test with a "High Risk" or "Extreme Risk" label. The vast majority of them are Reverse Mergers or SPAC deals, but you will find a good number of regular IPOs in that group as well. The overall picture is terrifying. At the time of writing, nine companies do not have an auditor, and trading in 15 Chinese stocks is currently halted by the exchanges (not counting recently delisted <a href="http://www.fixyou.co.uk/tracker_srm.php?s=CCME.PK">CCME</a> and <a href="http://www.fixyou.co.uk/tracker_srm.php?s=CAGC.PK">CAGC</a>). 37 companies have not filed their last quarterly or annual reports, some disappeared completely (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=CGDI.PK">CGDI</a>, <a href="http://www.fixyou.co.uk/tracker_srm.php?s=JADA.PK">JADA</a>), others filed a "going dark" Form 15 (<a href="http://www.fixyou.co.uk/tracker_srm.php?s=GHNA.PK">GHNA</a>, <a href="http://www.fixyou.co.uk/tracker_srm.php?s=ENHD.PK">ENHD</a>). I repeat, it is crucially important that you do your own research before taking a position in any of the "High Risk" or "Extreme Risk" stocks. If you don't have the time or means to do that, you should probably avoid this whole group of stocks.<br /><br />A <a href="http://www.fixyou.co.uk/tracker_risk.php"><b>sortable table with all Safety/Risk scores</b></a> has been added to the China Tracker.<br /><br /><b>Auditor Data</b><br /><br />We have added <b>tracker pages for all auditors</b> of Chinese companies in the Trading China database. You can find information of all past and current clients of this auditor, if the firm was dismissed or resigned, the exact dates of the engagement/dismissal, and a screen of all related companies with their year-to-date performance. These tracker pages can be accessed from the auditor trails of each individual company within the China Tracker (<a href="http://www.fixyou.co.uk/tracker_auditor_details.php?s=KPMG">Example: KPMG</a>).<br /><br />Another new screen is a <a href="http://www.fixyou.co.uk/tracker_auditor_changes.php"><b>chronological list of all auditor changes</b></a>, starting with the most recent ones. The data is taken from Form 8-K or Form 6-K SEC filings only, not from press releases or other sources. When you click through the pages of this screen you will find that the number of auditor resignations has exploded since the start of 2011.<br /><br />A similar screen is available for <a href="http://www.fixyou.co.uk/tracker_cfos.php"><b>Chief Financial Officers</b></a>.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com7tag:blogger.com,1999:blog-6154015141484451605.post-54861163229752601842011-04-24T11:56:00.003+01:002011-04-24T12:01:22.111+01:00Nasdaq Proposes New Rules for Reverse MergersIn a <a href="http://nasdaq.cchwallstreet.com/NASDAQ/pdf/nasdaq-filings/2011/SR-NASDAQ-2011-056.pdf">filing with the Securites and Exchange Commission</a> last week, the NASDAQ Stock Market proposed additional requirements for Reverse Merger companies that want to apply for a Nasdaq listing. According to the filing, the purpose of this rule change is to enhance investor protection, as this group of companies has "raised regulatory concerns."<br /><br />A previously unlisted private company that becomes a public company by merging with a public shell must file a Form 8-K with the SEC, within four days of completing this reverse merger. This filing must contain audited financial statements and most of the information that is usually provided in a Form 10. I am using <b>SinoCoking</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SCOK">SCOK</a>) as an example for this procedure: The operating business of this coal company merged into a shell company named "Ableauctions.com, Inc." (AAC) on February 5, 2010. The <a href="http://www.sec.gov/Archives/edgar/data/1099290/000141188610000004/form8k.htm">Form 8-K</a> was filed three days later, and the new entity was quoted on the Over-the-Counter Bulletin Board under the new ticker "SCOK" on February 8, 2010. SinoCoking amended this 8-K filing on March 5, 2010 to include the required audited financial statements.<br /><br />Nasdaq proposes now "<b>to prohibit a company going public via a reverse merger from applying to list until six months after the combined entity submits audited financial statements to the SEC</b>." In SinoCoking's case that would have meant that the company was not allowed to <i>apply</i> for a Nasdaq listing earlier than September 5, 2010. But Nasdaq was very eager to approve SCOK for an initial listing. The stock <a href="http://www.sec.gov/Archives/edgar/data/1099290/000141188610000017/form8a12b.htm">started trading on the NASDAQ Stock Market on February 18, 2010</a>, or more than two weeks before the company even filed its first audited financials with the SEC.<br /><br />The second proposed rule change calls for a company to <b>maintain a bid price of $4 per share or higher on at least 30 of the 60 trading days immediately preceding the filing of the initial listing application</b>, while trading in the over-the-counter market, on another national securities exchange, or on a listed foreign market. SinoCoking was trading on the OTC market for just eight sessions before it was allowed to move up to the big board.<br /><br />An additional requirement for a reverse merger uplisting to NASDAQ should be <b>the "timely filing" of at least two required periodic financial reports with the SEC</b> for domestic issuers (10-Q or 10-K), or in the case of a Foreign Private Issuer, one or more reports including financial statements for a period not less than six months (6-K or 20-F). SinoCoking filed its second such report (<a href="http://www.sec.gov/Archives/edgar/data/1099290/000114420410051388/0001144204-10-051388-index.htm">10-K</a>) on September 29, 2009, which - had the proposed new rules been already in place then - would have marked the day the company were allowed to apply for a Nasdaq listing. That is, if we interpret the requirement for "timely filing" only loosely. SCOK has submitted a Form NT-10, "Notification of inability to timely file Form 10-K or 10-Q", for three of the four reporting periods since it became a public company. With a strict interpretation of this rule, the company would still not be allowed to apply for a Nasdaq listing today, more than 14 months after the reverse merger completed.<br /><br />Nasdaq elaborates in its SEC filing what prompted the proposed rule changes:<ul> <li>extraordinary level of public attention to reverse merger companies</li> <li>financial press and short sellers raised allegations of widespread fraudulent behavior</li> <li>certain individuals who aggressively promote these transactions have significant regulatory histories</li> <li>RTO promoters have engaged in transactions that are disproportionately beneficial to them at the expense of public shareholders</li> <li>PCAOB identified issues with the audits of these companies</li> <li>the SEC recently took an enforcement action based on a firm's audit of a reverse merger company</li> <li>promoters manipulate prices higher to satisfy Nasdaq's initial listing bid price requirement</li> <li>companies have gifted stock to artificially satisfy the 300 round lot public holder requirement</li></ul><br />Nasdaq believes the additional listing requirements would help "to discourage inappropriate behavior on the part of companies, promoters and others." Heightened review procedures for reverse merger applicants had already been adopted over the past year, but new rules would result in "significant investor protection benefits." We have seen only two reverse merger uplistings since September 2010, <a href="http://www.fixyou.co.uk/tracker_details.php?s=NFEC">NFEC</a> and <a href="http://www.fixyou.co.uk/tracker_details.php?s=KEYP">KEYP</a> (currently halted), and the only Chinese small cap stock that <a href="http://finance.yahoo.com/news/Asia-Pacific-Wire-Cable-prnews-828232276.html">has been approved</a> to move from the OTC market to Nasdaq this year is <b>Asia Pacific Wire & Cable</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=AWRCF.OB">AWRCF</a>), but this is not a reverse merger company.<br /><br />Nasdaq sees the following investor protection benefits:<ul> <li>FINRA will have more time to view trading patterns and uncover potentially manipulative trading</li> <li>a more bona fide shareholder base</li> <li>assure that the $4 bid price was not satisfied through a quick manipulative scheme</li> <li>improve the reliability of the reported financial results</li> <li>auditors and the company's audit committee will have reviewed several quarters, at least, of the public company's operating results</li> <li>new internal controls, adopted at the time of the merger, will have been in place for a while</li></ul>The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com8tag:blogger.com,1999:blog-6154015141484451605.post-37838195662911453582011-04-03T09:10:00.002+01:002011-04-03T09:15:01.138+01:00China Stocks Smashed in the First QuarterHere is an overview of the First Quarter highlights:<br /><br /><a href="http://www.fixyou.co.uk/index_china_small.php"><b>Trading China Main Index</b></a><br /> - 759.17 (<span style="color: rgb(255, 0, 0);">down 17.27% for the First Quarter</span>)<br /> - 10 stocks are up, 30 are down<br /><br />Top Five<ul><li>BitAuto Holdings (BITA) <span style="color: rgb(0, 102, 0);">+35.18%</span></li> <li>AutoChina International (AUTC) <span style="color: rgb(0, 102, 0);">+25.86%</span></li> <li>Harbin Electric (HRBN) <span style="color: rgb(0, 102, 0);">+19.25%</span></li> <li>Bona Film Group (BONA) <span style="color: rgb(0, 102, 0);">+17.21%</span></li> <li>Funtalk China Holdings (FTLK) <span style="color: rgb(0, 102, 0);">+14.63%</span></li></ul> Bottom Five<ul> <li>China Integrated Energy (CBEH) <span style="color: rgb(255, 0, 0);">-65.22%</span></li> <li>China Valves Technology (CVVT) <span style="color: rgb(255, 0, 0);">-55.73%</span></li> <li>Duoyuan Global Water (DGW) <span style="color: rgb(255, 0, 0);">-52.78%</span></li> <li>China-Biotics (CHBT) <span style="color: rgb(255, 0, 0);">-45.38%</span></li> <li>China Xiniya Fashion (XNY) <span style="color: rgb(255, 0, 0);">-44.11%</span></li></ul> <a href="http://www.fixyou.co.uk/index_china_otc.php"><b>Trading China OTC Index</b></a><br /> - 596.88 (<span style="color: rgb(255, 0, 0);">down 34.81% for the First Quarter</span>)<br /> - 3 stocks are up, 37 are down<br /><br />Top Five<ul> <li>Sen Yu International (CSWG.OB) <span style="color: rgb(0, 102, 0);">+14.94%</span></li> <li>China Carbon Graphite (CHGI.OB) <span style="color: rgb(0, 102, 0);">+6.32%</span></li> <li>Rodobo International (RDBO.OB) <span style="color: rgb(0, 102, 0);">+1.61%</span></li> <li>SOKO Fitness & Spa (SOKF.OB) <span style="color: rgb(255, 0, 0);">-2.47%</span></li> <li>China Clean Energy (CCGY.OB) <span style="color: rgb(255, 0, 0);">-3.89%</span></li></ul> Bottom Five<ul> <li>Home System Group (HSYT.PK) <span style="color: rgb(255, 0, 0);">-94.00%</span></li> <li>Energroup Holdings (ENHD.PK) <span style="color: rgb(255, 0, 0);">-90.00%</span></li> <li>BioPharm Asia (BFAR.PK) <span style="color: rgb(255, 0, 0);">-87.16%</span></li> <li>China Redstone Group (CGPI.OB) <span style="color: rgb(255, 0, 0);">-59.16%</span></li> <li>Lotus Pharmaceuticals (LTUS.OB) <span style="color: rgb(255, 0, 0);">-58.31%</span></li></ul> <b>Quarterly Revision (First Quarter)</b><br /><br />Both China indexes are revised at the beginning of each quarter. Stocks that do no longer meet the requirements are being removed. Reasons could be posting a loss in the most recent quarter, uplisting to a higher exchange or just a huge decline in share price. Following is a list of all changes for both indexes.<br /><br /><a href="http://www.fixyou.co.uk/index_china_small.php"><b>Trading China Main Index</b></a><br /><br />Additions<ul> <li>Ambow Education Holding (AMBO)</li> <li>Camelot Information Systems (CIS)</li> <li>China New Borun (BORN)</li> <li>China Techfaith Wireless (CNTF)</li> <li>China XD Plastics (CXDC)</li> <li>eLong (LONG)</li> <li>Noah Holdings (NOAH)</li> <li>Sky-mobi Limited (MOBI)</li> <li>SouFun Holdings (SFUN)</li> <li>TAL Education Group (XRS)</li></ul> Removals<ul> <li>China-Biotics (CHBT)</li> <li>China Integrated Energy (CBEH)</li> <li>China MediaExpress (CCME)</li> <li>China Valves Technology (CVVT)</li> <li>Deer Consumer Products (DEER)</li> <li>Duoyuan Global Water (DGW)</li> <li>Global Education & Technology (GEDU)</li> <li>Gulf Resources (GFRE)</li> <li>L&L Energy (LLEN)</li> <li>Longwei Petroleum (LPH)</li></ul> <a href="http://www.fixyou.co.uk/index_china_otc.php"><b>Trading China OTC Index</b></a><br /><br />Additions<ul> <li>China Energy Recovery (CGYV.PK)</li> <li>China Executive Education (CECX.OB)</li> <li>China Internet Cafe Holdings (CICC.OB)</li> <li>China Pharmaceuticals (CFMI.OB)</li> <li>Eastern Environment Solutions (EESC.PK)</li> <li>Fuqi International (FUQI.PK)</li> <li>Sino Agro Food (SIAF.PK)</li> <li>Sinobiopharma (SNBP.OB)</li> <li>Yasheng Group (YHGG.PK)</li></ul> Removals<ul> <li>American Jianye Greentech (AJGH.PK)</li> <li>BioPharm Asia (BFAR.PK)</li> <li>China Infrastructure Construction (CHNC.OB)</li> <li>China Redstone Group (CGPI.OB)</li> <li>China TMK Battery Systems (DFEL.OB)</li> <li>Energroup Holdings (ENHD.PK)</li> <li>Gold Horse International (GHII.OB)</li> <li>Home System Group (HSYT.PK)</li> <li>Yayi International (YYIN.OB)</li></ul>The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com2tag:blogger.com,1999:blog-6154015141484451605.post-11984065787488303672011-04-02T14:54:00.003+01:002011-04-14T09:19:31.033+01:00Chinese 10-K Season Shake-Out<b>Long Delay (more than 15 Calendar Days)</b><br /><br /><b>China Automotive Systems</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAAS">CAAS</a>) - The Company announced that it <b>expects to restate its previously issued financial statements</b> for fiscal year 2009 and the first three quarters of fiscal year 2010 to reflect non-cash gains or losses related to the accounting treatment for the Company's convertible notes issued on February 15, 2008 based on the guidance outlined in Accounting Standard Codification (ASC) 815. The Company undertook a review to determine the total amount of the errors and the accounting periods in which the errors occurred. The Company's review was overseen by the audit committee of the board of directors of the Company. The Audit Committee concluded on March 12, 2011 that the Company's previously issued audited consolidated financial statements as of and for the fiscal year ended December 31, 2009 and unaudited interim consolidated financial statements as of and for the quarterly periods ended March 31, June 30 and September 30, 2010 should no longer be relied upon because of these errors in the financial statements. The Company's board of directors agreed with the Audit Committee's conclusions. The Company intends to restate these financial statements. Because of the nature and timing of the review, the Company is unable to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 with the SEC on March 16, 2011, the prescribed due date. The Company <b>does not expect that such filing will be made within the extension period</b> provided for under Rule 12b-25. The delay could not be eliminated without unreasonable effort or expense. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 will be filed as soon as practicable after the Company has completed the restatement process.<br /><br /><b>China Agritech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CAGC</a>, <span class="negative">trading halted</span> since 03/14/2011) - The Company could not complete the filing of its Annual Report on Form 10-K for the year ended December 31, 2010 due to a delay in obtaining and compiling information required to be included in the Company's Form 10-K, which delay could not be eliminated by the Company without unreasonable effort and expense. In addition, <b>the Company has dismissed its auditors and is in the process of finding a new independent registered public accounting firm</b> to audit the financial statements for the year ended December 31, 2010.<br /><br /><b>China MediaExpress</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CCME">CCME</a>, <span class="negative">trading halted</span> since 03/11/2011) - The Company cannot at this time estimate when the internal investigation of the relevant issues will conclude. The Company intends to file the Form 10-K as soon as reasonably practicable.<br /><br /><b>China Century Dragon Media</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CDM">CDM</a>, <span class="negative">trading halted</span> since 03/21/2011) - The Registrant's Annual Report on Form 10-K for the year ended December 31, 2010 cannot be filed within the prescribed time period due to the resignation of the Registrant's auditor. As previously reported by the Registrant, on March 22, 2011 MaloneBailey resigned as the Registrant's independent auditor and provided the Registrant with a notice of resignation, which indicated that due to discrepancies noted on customer confirmations and the auditor's inability to directly verify the Registrant's bank records, MaloneBailey believes <b>these irregularities may be an indication that the accounting records have been falsified</b>, which would constitute an illegal act. MaloneBailey stated in its Resignation Letter that the Registrant's management had not provided a satisfactory explanation of the discrepancies noted on the customer confirmations and was unwilling to provide authorization to the bank so that the auditor could obtain official bank records directly from the bank's record keeping system. The Board of Directors of the Registrant has formed a Special Investigation Committee. The Special Investigation Committee will investigate, review and analyze the facts, circumstances and issues related MaloneBailey's resignation as independent auditor and the Registrant's accounting records. The Registrant will file its Annual Report on Form 10-K for the year ended December 31, 2010 as soon as it is able; however, the Registrant is not able to provide a reasonable estimate as to such filing at this time, which <b>will not occur within the fifteenth calendar day</b> after the prescribed due date for such report.<br /><br /><b>China Electric Motors</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CELM">CELM</a>, <span class="negative">trading halted</span> since 03/31/2011) - The registrant is unable to file its Annual Report on Form 10-K for the year ended December 31, 2010, within the prescribed time period due to possible discrepancies concerning the Company's banking statements that were very recently identified by the Company's auditors in the course of their audit of the Company's consolidated financial statements for the fiscal year ended December 31, 2010. The Company and its advisors are working expeditiously to resolve the issues discovered during the audit, but the Company, at this time, is <b>unable to determine when it will file its Annual Report</b> on Form 10-K for the year ended December 31, 2010.<br /><br /><b>China Medicine</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CHME.OB">CHME</a>) - As previously disclosed in the Current Report on Form 8-K filed by China Medicine Corporation with the Securities and Exchange Commission (SEC) on March 23, 2011, the Company announced that it <b>expects to restate its previously issued financial statements</b> for fiscal years 2008 and 2009, and the quarters within the fiscal years 2008, 2009 and 2010 in order to correct certain accounting and reporting errors that impact the accuracy of the previously issued financial statements (as defined below). The Board of Directors of the Company, after consultation with and upon recommendation of the management of the Company and its Audit Committee, concluded that the Company's previously issued financial statements contained in its Annual Report on Form 10-K for the fiscal years 2008 and 2009, and the Quarterly Reports on Form 10-Q for the periods within the fiscal years 2008, 2009 and 2010 should no longer be relied upon. The Company intends to restate the previously issued financial statements. Because of the nature and timing of the review, the Company will be unable to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 with the SEC by March 31, 2011, the prescribed due date. The Company <b>does not expect that such filing will be made within the extension period</b> provided for under Rule 12b-25 of the Securities Exchange Act of 1934, as amended. The delay could not be eliminated without unreasonable effort or expense. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 will be filed as soon as practicable after the Company has completed the restatement process.<br /><br /><b>China Intelligent Lighting</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CIL">CIL</a>, <span class="negative">trading halted</span> since 03/24/2011) - The Registrant's Annual Report on Form 10-K for the year ended December 31, 2010 cannot be filed within the prescribed time period due to the <b>termination of engagement</b> with MaloneBailey as the Registrant's independent registered public accounting firm. As previously reported by the Registrant in the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2011, the Registrant terminated the engagement of MaloneBailey as its independent auditor on March 23, 2011, and on March 24, 2011, MaloneBailey provided a letter of resignation as the Registrant's independent auditor. In the Resignation Letter, MaloneBailey indicated that the resignation was due to <b>accounting fraud involving forging of the Registrant's accounting records and forging bank statements, in addition to other discrepancies identified</b> during its testing of the Registrant's accounts receivable. The Registrant will file its Annual Report on Form 10-K for the year ended December 31, 2010 as soon as it is able. However, the Registrant is not able to provide a reasonable estimate as to such filing at this time, which <b>will not occur within the fifteenth calendar day</b> after the prescribed due date for such report.<br /><br /><b>Keyuan Petrochemicals</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=KEYP">KEYP</a>, <span class="negative">trading halted</span> since 04/01/2011) - In connection with the Registrant's financial statements as at December 31, 2010 and for the fiscal year then ended, <b>issues were raised by the Registrant's independent auditor, primarily relating to unexplained issues regarding certain cash transactions and recorded sales</b>. The independent auditor reported these issues to the Registrant's Audit Committee. The Registrant's Audit Committee has engaged independent legal counsel and commenced an investigation of the issues raised by the Registrant's auditors. In as much as completion of Registrant's 2010 financial statements is dependent, following completion of the Audit Committee's investigation, upon a satisfactory resolution of the issues raised and any other matters that may come to light as a result of further audit procedures, the Registrant was not able to complete its Form 10-K Annual Report by March 31, 2011. Although the Registrant believes that the Audit Committee shall undertake to complete its investigation as soon as practicable, and the Registrant shall use its best efforts to file the Annual Report by April 15, 2011, <b>there can be no assurance that it will be able to do so by such date</b>.<br /><br /><b>NIVS IntelliMedia Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=NIV">NIV</a>, <span class="negative">trading halted</span> since 03/24/2011) - On March 27, 2011, the Company's Board of Directors appointed a Special Committee ... to <b>investigate certain allegations of the Company's former auditor</b>, Malone Bailey, in connection with which Malone Bailey withdrew its audit opinion related to the Company's audited financial statements for the year ended December 31, 2009, and to take remedial action if appropriate. On the same day, the Special Committee engaged Sidley Austin LLP as independent counsel in connection with the investigation, and on March 30, 2011, Sidley retained Deloitte to serve as its forensic accounting advisor. The Company has also separately <b>retained a new independent registered public accounting firm, BDO China Li Xin Da Hua CPAs</b>, to audit its financial statements for the 2009 year, as well as for the year ended December 31, 2010. At this time, the Company is <b>unable to predict when it will be in a position to file its annual report</b> on Form 10-K for the year ended December 31, 2010, however, the Company intends to submit such filing as soon as practicable after completion of the work that will be performed by the Special Committee and by BDO China Li Xin Da Hua CPAs.<br /><br /><b>ShengdaTech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SDTH">SDTH</a>, <span class="negative">trading halted</span> since 03/15/2011) - On March 15, 2011, Shengdatech announced that it had appointed a special committee of the Board of Directors <b>to investigate potentially serious discrepancies and unexplained issues relating to the Company and its subsidiaries' financial records identified by the Company's auditors</b> in the course of their audit of the consolidated financial statements for the fiscal year ended December 31, 2010. The special committee is composed of the independent directors comprising the Company's audit committee. The audit committee retained O'Melveny & Myers LLP as independent outside counsel, which has initiated an internal investigation. The outside counsel to the committee has notified the Staff of the Securities and Exchange Commission of the commencement of the internal investigation. Given that the investigation only recently commenced, the Company cannot predict at this time whether that investigation will require any adjustments to its financial statements, and if so whether such adjustments will be material. Due to the pendency of the internal investigation, <b>the Company will not be able to file its Annual Report on Form 10-K in a timely manner</b>. The Company cannot at this time estimate when the internal investigation of the relevant issues will conclude. The Company intends to file the Form 10-K as soon as reasonably practicable.<br /><br /><b>Wonder Auto Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">WATG</a>) - As previously announced on February 23, 2011, in connection with the preparation of its consolidated financial statements for the fiscal year ended December 31, 2010, Wonder Auto Technology concluded, that its financial statements as of and for the years ended December 31, 2008 and 2009, included in its Annual Report on Form 10-K for the year ended December 31, 2009, as well as the financial statements included in its Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30 during each of the years 2008 and 2009 should no longer be relied upon due to a cutoff error regarding timing of revenue in such periods. Additionally, the Company is still evaluating the impact of the cutoff-errors on its financial results for the year ended December 31, 2010 and on its internal control over financial reporting as of December 31, 2010. As a result, the Company is unable to complete its Form 10-K within the prescribed time period. The Company remains committed to completing its Form 10-K at the earliest possible time, but <b>does not currently anticipate its completion within the fifteen calendars</b> following the prescribed due date.<br /><br /><b>Unspecified Delay</b><br /><br /><b>Asia Cork</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=AKRK.PK">AKRK</a>) - The Registrant is unable to file its 10-K for year ended December 31, 2010 in a timely manner because the Registrant is not able to complete its financial statements without unreasonable effort or expense.<br /><br /><b>China Electronics Holdings</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CEHD.OB">CEHD</a>) - The compilation, dissemination and review of the information required to be presented in the registrant's Form 10-K for the fiscal year ended December 31, 2010 has imposed time constraints that have rendered timely filing of the Form 10-K impracticable without unreasonable effort and expense.<br /><br /><b>China 3C Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CHCG.OB">CHCG</a>) - The annual report of China 3C Group on Form 10-K could not be filed within the prescribed time period due to the fact that the Company was unable to finalize its audited financial results as well as the disclosure requirements of Form 10-K without unreasonable expense or effort. As a result, the Company could not solicit and obtain the necessary review of the Form 10-K and signatures thereto in a timely fashion prior to the due date of the report.<br /><br /><b>China Industrial Waste Mgmt</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CIWT.PK">CIWT</a>) - The Registrant has experienced delays in completing its financial statements for the year ended December 31, 2010, as its auditor has not had sufficient time to audit the financial statements for the year ended December 31, 2010. As a result, the filing of the Registrant's Form 10-K cannot be made within the prescribed time period.<br /><br /><b>China Ritar Power</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CRTP">CRTP</a>) - Certain financial and other information necessary for an accurate and full completion of the Form 10-K could not be provided within the prescribed time period without unreasonable effort or expense.<br /><br /><b>China Solar & Clean Energy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CSOL.OB">CSOL</a>) - Registrant did not obtain all information prior to filing date and attorney and accountant could not complete the required financial statements and management could not complete Management's Discussion and Analysis of such financial statements by March 31, 2011.<br /><br /><b>Emerald Dairy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=EMDY.OB">EMDY</a>) - We have not yet finalized our financial statements for the fiscal year ended December 31, 2010. Therefore, we are unable to quantify the anticipated changes in our results of operations at this time. However, based on information currently available to us, we anticipate that the earnings statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 will reflect increases in sales, cost of goods sold, gross profit, and operating expenses, and <b>a decrease in net income</b>, for the fiscal year ended December 31, 2010, as compared to the fiscal year ended December 31, 2009.<br /><br /><b>Fushi Copperweld</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=FSIN">FSIN</a>) - In the process of preparing our financial statements for the year ended December 31, 2010, management reevaluated the application of GAAP in certain past accounting treatments, which are non-cash and non-operating items. While it is unfortunate that these reconsiderations are causing a delay in our filing, we stress the fact that these are all non-cash adjustments related to various corporate-level account treatments and will not materially affect our non-GAAP, core operating results such as revenue, gross profit and operating income. The Company plans to file its Form 10-K for the year ended December 31, 2010 and publish financial fourth quarter and full year results as soon as practicable following the completion of this reevaluation. However, due to the time needed, we are not in a position to file our 10-K within the required time period. (UPDATE: <span class="positive">10-K filed</span> on 04/05/2011)<br /><br /><b>Huifeng Bio-Pharma</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HFGB.PK">HFGB</a>) - Certain financial and other information necessary for an accurate and full completion of the Form 10-K could not be provided within the prescribed time period without unreasonable effort or expense.<br /><br /><b>Home System Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HSYT.PK">HSYT</a>) - Certain financial and other information necessary for an accurate and full completion of the Form 10-K could not be provided within the prescribed time period without unreasonable effort or expense.<br /><br /><b>North China Horticulture</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=IDCX.OB">IDCX</a>) - Certain financial and other information necessary for an accurate and full completion of the Form 10-K could not be provided within the prescribed time period without unreasonable effort or expense.<br /><br /><b>Sino Clean Energy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SCEI">SCEI</a>) - The report of Sino Clean Energy Inc. on Form 10-K could not be filed within the prescribed time period due to the fact that the Company was unable to finalize its audited financial results as well as the disclosure requirements of Form 10-K without unreasonable expense or effort. As a result, the Company could not solicit and obtain the necessary review of the Form 10-K and signatures thereto in a timely fashion prior to the due date of the report. (UPDATE: <span class="positive">10-K filed</span> on 04/05/2011)<br /><br /><b>Sunrise Real Estate</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SRRE.PK">SRRE</a>) - The Company will be delayed in the filing of its 10-K due to a delay in the preparation of its financial statements.<br /><br /><b>Xinyinhai Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=XNYH.OB">XNYH</a>) - Our Annual Report on Form 10-K could not be filed within the required time because there was a delay in completing the adjustments necessary to close the books for the year. (UPDATE: <span class="positive">10-K filed</span> on 04/13/2011)<br /><br /><b>Filing Expected within Grace Period (15 Calendar Days)</b><br /><br /><b>American Jianye Greentech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=AJGH.PK">AJGH</a>) - The Registrant's financial statements could not be completed within the time provided without undue burden and expense. The Registrant expects to file within the period provided by the extension.<br /><br /><b>Artificial Life</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=ALIF.OB">ALIF</a>) - Artificial Life is in the process of having its financial statements for the fiscal year ended December 31, 2010 audited by its independent accountants. The process of compiling and disseminating the information required to be included in its Annual Report on Form 10-K for Fiscal Year 2010, as well as the completion of the required audit of the Registrant's financial information, could not be completed by March 31, 2011 without incurring undue hardship and expense. The Company presently anticipates that such annual report will be filed no later than fifteen calendar days after its original due date.<br /><br /><span style="font-weight:bold;">UPDATE:</span> <span class="negative">On April 6, 2011, the Company announced the termination of its engagement with KPMG, its independent auditors</span>. Such engagement was terminated effective March 30, 2011, though after such termination, the parties continued discussing the possibility of KPMG's engagement being extended in order for the audit to be completed within the timeframe of the 12b-25 extension. The Company is now in the process of assigning and evaluating new independent registered public accounting firms to audit its financial statements for Fiscal Year 2010. The Company will file its 2010 10-K at such time as its audit has been completed.<br /><br /><b>BioPharm Asia</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=BFAR.PK">BFAR</a>) - BioPharm Asia is unable to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 due to a delay in completing the financial statements, and the audit procedures related thereto, required by the Company's Form 10-K, which delay could not be eliminated by the Company without unreasonable effort and expense. In accordance with Rule 12b-25 of the Securities Exchange Act of 1934, the Company will file its Form 10-K no later than the fifteenth calendar day following the prescribed due date.<br /><br /><b>China Green Material</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGM.PK">CAGM</a>) - On March 23, 2011, the Registrant restated its financial statements as of and for the quarterly periods ended June 30, 2010 and September 30, 2010. Those quarterly financial statements were restated in response to an S.E.C. Staff comment relating to the Registrant's accounting for warrants issued by the Registrant during April and June 2010. Because of the restatements, the Registrant needs additional time to ensure that the principles applied in the restatements are consistently applied in the audited financial statements to be included in the annual report on Form 10-K for the fiscal year ended December 31, 2010. As a result, the Registrant is unable, without unreasonable effort and expense, to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 by the prescribed filing date. The Registrant intends to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 prior to April 15, 2011. (UPDATE: <span class="positive">10-K filed</span> on 04/13/2011)<br /><br /><b>China Executive Education</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CECX.OB">CECX</a>) - The Registrant is unable to file its Form 10-K within the prescribed time period without unreasonable effort or expense due to the fact that it has not completed the process of preparing and integrating operating information into statements for the fiscal year 2010. The Registrant anticipates that it will file its Form 10-K within the fifteen-day grace period provided by Exchange Act Rule 12b-25.<br /><br /><b>China Education Alliance</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CEU">CEU</a>) - The Company has encountered a delay in assembling the information, in particular its financial statements for the fiscal year ended December 31, 2010, required to be included in its December 31, 2010 Form 10-K Annual Report. The Company expects to file its December 31, 2010 Form 10-K Annual Report with the U.S. Securities and Exchange Commission within 15 calendar days of the prescribed due date.<br /><br /><b>China Pharmaceuticals</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CFMI.OB">CFMI</a>) - The Company has encountered a delay in assembling the information, in particular its financial statements for the fiscal year ended December 31, 2010, required to be included in its December 31, 2010 Form 10-K Annual Report. The Company expects to file its December 31, 2010 Form 10-K Annual Report with the U.S. Securities and Exchange Commission within 15 calendar days of the prescribed due date.<br /><br /><b>China Carbon Graphite</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CHGI.OB">CHGI</a>) - The compilation, dissemination and review of the information required to be presented in the Form 10-K for the fiscal year ended December 31, 2010 has imposed time constraints that have rendered timely filing of the Form 10-K impracticable without undue hardship and expense to the Registrant. The Registrant represents that the Form 10-K will be filed within the period described under Rule 12b-25(b)(2)(ii).<br /><br /><b>China New Energy Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CNER.PK">CNER</a>) - The Registrant is unable to file its Form 10-K within the prescribed time period without unreasonable effort or expense due to the fact that it has not completed the process of preparing and integrating operating information into its financial statements for fiscal year 2010. The Registrant anticipates that it will file its Form 10-K within the fifteen-day grace period provided by Exchange Act Rule 12b-25. <br /><br /><b>China Organic Agriculture</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CNOA.OB">CNOA</a>) - China Organic Agriculture is unable to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 due to a delay in completing the financial statements, and the audit procedures related thereto, required by the Company's Form 10-K, which delay could not be eliminated by the Company without unreasonable effort and expense. In accordance with Rule 12b-25 of the Securities Exchange Act of 1934, the Company will file its Form 10-K no later than the fifteenth calendar day following the prescribed due date.<br /><br /><b>China Shuangji Cement</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CSGJ.OB">CSGJ</a>) - The Company has encountered a delay in assembling the information, in particular its financial statements for the fiscal year ended December 31, 2010, required to be included in its December 31, 2010 Form 10-K Annual Report. The Company expects to file its December 31, 2010 Form 10-K Annual Report with the U.S. Securities and Exchange Commission within 15 calendar days of the prescribed due date.<br /><br /><b>China Yongxin Pharma</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CYXN.OB">CYXN</a>) - The Registrant is in the process of completing its Annual Report on Form 10-K and providing the requisite information to its auditors. We expect to file the required report within the allotted extension.<br /><br /><b>Highpower International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HPJ">HPJ</a>) - Highpower International is still in the process of preparing documents to be filed as exhibits with the 10-K for the year ended December 31, 2010. Therefore, the Company is unable to file its Form 10-K for the year ended December 31, 2010 within the prescribed time period. The Company will file its Annual Report on Form 10-K as soon as possible, and in any event no later than the fifteenth calendar day following the prescribed due date for such report. (UPDATE: <span class="positive">10-K filed</span> on 04/13/2011)<br /><br /><b>HQ Sustainable Maritime</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HQS">HQS</a>, <span class="negative">trading halted</span> since 04/01/2011) - HQ Sustainable Maritime Industries is unable to file its Report on Form 10-K for the year ended December 31, 2010 within the prescribed time period due to delays in compiling the information for the preparation of the financial statements. The Registrant fully expects to be able to file within the additional time allowed by this form.<br /><br /><b>Orsus Xelent Technologies</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=ORS">ORS</a>) - The Registrant cannot file its Annual Report on Form 10-K for the period ended December 31, 2010 within the prescribed time period because of the delays in compiling the information for the preparation of the financial statements and management's discussion and analysis for the Form 10-K which could not be eliminated without unreasonable effort or expense. The Registrant is working diligently with its auditors to complete its Annual Report on Form 10-K and expects to file its Form 10-K no later than fifteen days following its prescribed due date.<br /><br /><b>Sino Agro Food</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SIAF.PK">SIAF</a>) - SIAF could not complete the filing of its Annual Report on Form 10-K for the year ended December 31, 2010 due to a delay in obtaining and compiling information required to be included in the Company's Form 10-K, which delay could not be eliminated by the Company without unreasonable effort and expense. In accordance with Rule 12b-25 of the Securities Exchange Act of 1934, as amended, the Company will file its Form 10-K no later than the fifteenth calendar day following the prescribed due date. <br /><br /><b>Skystar Bio-Pharmaceutical</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SKBI">SKBI</a>) - The Company has experienced a delay in completing the information necessary for including in its December 31, 2010 Form 10-K Annual Report. The Company expects to file the Annual Report within the allotted extension period. (UPDATE: <span class="positive">10-K filed</span> on 04/11/2011)<br /><br /><b>Universal Travel Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=UTA">UTA</a>) - The Company has encountered a delay in assembling the information, in particular its financial statements for the fiscal year ended December 31, 2010, required to be included in its Annual Report on Form 10-K for the year ended December 31, 2010. The Company expects to file its Annual Report on Form 10-K for the year ended December 31, 2010 with the U.S. Securities and Exchange Commission within 15 calendar days of the prescribed due date. (UPDATE: <span class="negative">Trading Halted</span> since 04/12/2011)<br /><br /><b>Worldwide Energy and Mfg</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=WEMU.OB">WEMU</a>) - The compilation, dissemination and review of the information required to be presented in the Form 10-K has imposed time constraints that have rendered timely filing of the Form 10-K impracticable without undue hardship and expense to the registrant. The registrant undertakes the responsibility to file such annual report no later than fifteen days after its original due date.<br /><br /><b>Wuhan General Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=WUHN">WUHN</a>) - Wuhan General Group is unable to file its Report on Form 10-K for the year ended December 31, 2010 within the prescribed time period due to delays in compiling the information for the preparation of the financial statements. The Registrant fully expects to be able to file within the additional time allowed by this form.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com11tag:blogger.com,1999:blog-6154015141484451605.post-52763479547144120502011-03-26T14:49:00.004+00:002011-03-26T14:54:35.758+00:00WestPark Capital's RTO Deals<a href="http://www.wpcapital.com/">WestPark Capital</a>'s CEO, Richard Rappaport invented a mechanism he called WRASP, in which a company becomes publicly traded through a reverse merger and trades directly on a senior exchange (NYSE, Amex, or Nasdaq), avoiding the OTCBB completely. Rappaport <a href="http://findarticles.com/p/articles/mi_m0EIN/is_20100524/ai_n53756939/">praises his invention</a>, stating that it has "generally proven to be less costly, less time consuming, <span style="font-weight:bold;">involves less risk</span> and even less dilution of ownership than a traditional IPO or a reverse merger. ... The 'WRASP' generally possesses superior liquidity, valuation and institutional coverage, combining the benefits of an IPO and Reverse Merger."<br /><br />In the past two years, WestPark completed five such WRASP deals. A sixth, China Wesen Recycling Technology, is currently in the <a href="http://www.sec.gov/Archives/edgar/data/1421524/000114420411007704/v210728_s1.htm">IPO pipeline</a>.<ul><li>March 2009 - <b>NIVS IntelliMedia Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=NIV">NIV</a>, NYSE Amex)</li> <li>October 2009 - <b>ZST Digital Networks</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=ZSTN">ZSTN</a>, Nasdaq)</li> <li>January 2010 - <b>China Electric Motor</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CELM">CELM</a>, Nasdaq)</li> <li>June 2010 - <b>China Intelligent Lighting & Electronics</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CIL">CIL</a>, NYSE Amex)</li> <li>February 2011 - <b>China Century Dragon Media</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CDM">CDM</a>, NYSE Amex)</li></ul>Now the New York Stock Exchange has <a href="http://www.nasdaqtrader.com/Trader.aspx?id=TradeHalts">halted trading</a> in three of those five stocks last week. CDM was halted on March 21, at market open, and both NIV and CIL were halted on March 24 at 9:51am. NYSE Regulation <a href="http://www.noodls.com/view/c730720fe13fa568899ab2624a5a3821dc99d854">issued a press release</a> about the CDM halt, stating that it "is evaluating both the need for certain public disclosure, as well as the overall suitability for continued listing of the Company’s common stock." The company was requested to provide additional information to NYSE Amex on or before March 24, 2011, and while the company announced that it intends to fully cooperate with the regulators, the trading halt is still in place this weekend.<br /><br />NYSE issued a similar press release for the NIV trading halt. But here we have since learned a lot more details about what happened. In an <a href="http://www.sec.gov/Archives/edgar/data/1403795/000114420411017263/v215951_8-k.htm">8-K Filing</a> late Friday, it was revealed that Malone Bailey submitted its resignation as the Company's independent auditor. The firm based its resignation on what it characterized illegal acts involving the Company's accounting records and bank statements and discrepancies in accounts receivable. And if we look at MaloneBailey's resignation letter in detail, we can see that this is likely another case of accounting fraud:<blockquote>In our resignation letter dated March 24, 2011, MaloneBailey cited that <b>MaloneBailey found accounting fraud and irregularities in forging accounting records and bank statements during 2010 NIVS audit</b>. On March 21 with email and On March 22, 2011, MaloneBailey, LLP, informed Charles Mo, NIVS independent board member and the chairman of the audit committee about "significant difficulties encountered during the 2010 audit." During the conversation, MaloneBailey, LLP informed Mr. Mo that <b>two other public companies audits were conducted at the NIVS accounting department location</b>. These two companies are located in Beijing and Guangzhou. However, their books and records were shipped to NIVS accounting department and MaloneBailey conducted the audits of these two public companies at NIVS accounting department. NIVS accounting personnel were involved in coordinating the two audits. <b>MaloneBailey found accounting fraud and irregularities in these two audits</b>. After the discovery, we encountered difficulties with <b>management trying to limit our scope of the NIVS audit</b>.</blockquote>NIV and China Intelligent Lighting (CIL) have a lot in common. They share the same facilities, same auditor, and there are many connections within senior management (founders, directors). It is reasonable to assume at this point that the trading halt for CIL was imposed for related issues. <br /><br />Which brings us back to WestPark Capital and Richard Rappaport. It might just be coincidence that 60% of the firm's "WRASP"-IPOs were halted within three days, but I wouldn't bet the farm on this. In fact, I would be very careful with the two remaining stocks, CELM and ZSTN, until we learn more details. The latest of WestPark's deals just became a public company last month, and should CDM's situation be similar to that of NIV, it will fall back directly to WestPark and the quality of its pre-IPO due diligence process. The firm has been in trouble already last year, when <a href="http://www.finra.org/Newsroom/NewsReleases/2010/P121379">FINRA fined WestPark</a> to pay $400,000 for failing to supervise brokers with histories of disciplinary actions (a matter of general securities fraud), and suspended its former Chief Compliance Officer and Chief Operations Officer for several months.<br /><br />Here is a list of all reverse merger deals of the past few years, involving shells owned by WestPark Capital / <a href="http://www.sec.gov/cgi-bin/own-disp?CIK=0001283175&action=getowner">Richard Rappaport</a>:<ul> <li><b>Asia Time</b> (ATYM.PK, SRKP 9 Inc.), delisted from NYSE Amex on April 23, 2009</li> <li><b>China Century Dragon Media</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CDM">CDM</a>, SRKP 25 Inc.)</li> <li><b>China Electric Motor</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CELM">CELM</a>, SRKP 21 Inc.)</li> <li><b>China Intelligent Lighting & Electronics</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CIL">CIL</a>, SRKP 22 Inc.)</li> <li><b>China Shenghuo Pharmaceutical</b> (KUN, SRKP 8 Inc.)</li> <li><b>China Wesen Recycling Technology</b> (SRKP 23 Inc.), pre-IPO</li> <li><b>Feigeda Electronic Technology</b> (SRKP 20 Inc.), not yet listed</li> <li><b>Highpower International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HPJ">HPJ</a>, SRKP 11 Inc.)</li> <li><b>NIVS IntelliMedia Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=NIV">NIV</a>, SRKP 19 Inc.)</li> <li><b>Yinlips Technology</b> (SRKP 17 Inc.), unlisted, applied for NYSE Amex listing on June 16, 2009</li> <li><b>ZST Digital Networks</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=ZSTN">ZSTN</a>, SRKP 18 Inc.)</li></ul>The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com20tag:blogger.com,1999:blog-6154015141484451605.post-70334581628437885302011-03-24T11:51:00.006+00:002011-03-24T12:00:00.013+00:00Delayed 10-K FilingsHere is a little summary of Chinese companies that ran into problems with their full-year audit. The deadline for non-accelerated filers ends on March 31, so I do expect many more companies to file for an extension in the next seven days.<br /><br /><b>China Agritech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CAGC</a>) was last trading at $6.25, down 49.07% for the year, and down 62.35% from the November 9 high at $16.60. The Trading China Tracker Score is UNDER REVIEW.<br /><br />CAGC fired its auditor (Ernst & Young) earlier this month, and without an auditor it is impossible that we will see a 10-K filing before the end of the extended deadline. The stock is currently halted and there is a good chance that it won't reopen on Nasdaq. <br /><br />"The Company could not complete the filing of its Annual Report on Form 10-K for the year ended December 31, 2010 due to a delay in obtaining and compiling information required to be included in the Company's Form 10-K, which delay could not be eliminated by the Company without unreasonable effort and expense. In addition, the Company has dismissed its auditors and is in the process of finding a new independent registered public accounting firm to audit the financial statements for the year ended December 31, 2010."<br /><br /><b>China Automotive Systems</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAAS">CAAS</a>) is currently trading at $7.69, down 43.54% for the year, and down 57.24% from the October 13 high at $17.98. The Trading China Tracker Score is 10 (Buy).<br /><br />The company engaged PricewaterhouseCoopers in December as their previous auditor, Schwartz Levitsky Feldman, resigned. Now the Annual Report is delayed, as the company has to make a bunch of restatements. According to the filing, China Automotive expects to complete the report "as soon as practicable", but not within the standard 15-day extension period. <br /><br />"The Company announced that it <b>expects to restate its previously issued financial statements</b> for fiscal year 2009 and the first three quarters of fiscal year 2010 <b>to reflect non-cash gains or losses</b> related to the accounting treatment for the Company's convertible notes issued on February 15, 2008 based on the guidance outlined in Accounting Standard Codification (ASC) 815. The Company undertook a review to determine the total amount of the errors and the accounting periods in which the errors occurred. The Company's review was overseen by the audit committee of the board of directors of the Company. The Audit Committee concluded on March 12, 2011 that the Company's previously issued audited consolidated financial statements as of and for the fiscal year ended December 31, 2009 and unaudited interim consolidated financial statements as of and for the quarterly periods ended March 31, June 30 and September 30, 2010 should no longer be relied upon because of these errors in the financial statements. The Company's board of directors agreed with the Audit Committee's conclusions. The Company intends to restate these financial statements. Because of the nature and timing of the review, the Company is unable to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 with the SEC on March 16, 2011, the prescribed due date. <b>The Company does not expect that such filing will be made within the extension period</b> provided for under Rule 12b-25. The delay could not be eliminated without unreasonable effort or expense. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 will be filed as soon as practicable after the Company has completed the restatement process.<br /><br /><b>China Biologic Products</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CBPO">CBPO</a>) is currently trading at $15.50, down 5.44% for the year, and down 17.25% from the October 6 high at $18.73. The Trading China Tracker Score is 4 (Hold).<br /><br />CBPO is one of those companies that upgraded auditors in December, from tainted (RINO, CHME) firm Frazer Frost to Big Four firm KPMG. The delay is not surprising, given that most former Frazer Frost clients came under heavy pressure, and KMPG hasn't done any audit work on CBPO before. The stock held up very well in the recent China small caps turmoil, but the short interest in CBPO is very high, many people seem to bet on KMPG not signing off on the report. I would definitely wait for the 10-K - which should be filed by the end of March - and check if it comes out clean (internal controls).<br /><br />"The Registrant is unable to file its Form 10-K within the prescribed time period without unreasonable effort or expense due to the fact that it has not completed the process of preparing and integrating its operating and financial information into statements for the fiscal year ended December 31, 2010. The Registrant anticipates that it <b>will file its Form 10-K no later than the fifteenth calendar day following the prescribed due date</b>, as permitted by Exchange Act Rule 12b-25."<br /><br /><b>China MediaExpress</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CCME">CCME</a>) was last trading at $11.88, down 25.01% for the year, and down 50.44% from the January 28 high at $23.97. The Trading China Tracker Score is UNDER REVIEW.<br /><br />The CCME story is well-known. The company's auditor resigned, and an internal investigation has commenced. The allegations are very serious and a best-case scenario would be a set of restatements that leaves the company with a meaningful cash position and a sizable business. It is unlikely that CCME will be able to engage a new auditor before the investigation has concluded, therefore a 10-K filing should probably not be expected before summer. We will see if Nasdaq allows a months-long trading halt, or if the stock will re-open for trading on the pink sheets.<br /><br />"The Company cannot at this time estimate when the internal investigation of the relevant issues will conclude. The Company intends to file the Form 10-K as soon as reasonably practicable."<br /><br /><b>China Medicine</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CHME.OB">CHME</a>) was last trading at $1.16, down 33.34% for the year, and down 56.23% from the November 10 high at $2.65. The Trading China Tracker Score is -1 (Sell).<br /><br />CHME <a href="http://www.sec.gov/Archives/edgar/data/1328790/000114420411016626/v215753_8k.htm">announced last night</a> that "certain accounting and reporting errors were identified with respect to <b>improper activities by certain employees</b>." This will result in numerous restatements, and the upcoming form 10-K will be delayed for probably a very long time. I would avoid this name at all cost until we know more about what's going on there. <br /><br />"As previously disclosed in the Current Report on Form 8-K filed by China Medicine Corporation with the Securities and Exchange Commission (SEC) on March 23, 2011, the Company announced that it <b>expects to restate its previously issued financial statements</b> for fiscal years 2008 and 2009, and the quarters within the fiscal years 2008, 2009 and 2010 in order to correct certain accounting and reporting errors that impact the accuracy of the previously issued financial statements (as defined below). The Board of Directors of the Company, after consultation with and upon recommendation of the management of the Company and its Audit Committee, concluded that the Company's previously issued financial statements contained in its Annual Report on Form 10-K for the fiscal years 2008 and 2009, and the Quarterly Reports on Form 10-Q for the periods within the fiscal years 2008, 2009 and 2010 should no longer be relied upon. The Company intends to restate the previously issued financial statements. Because of the nature and timing of the review, the Company will be unable to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 with the SEC by March 31, 2011, the prescribed due date. The Company <b>does not expect that such filing will be made within the extension period</b> provided for under Rule 12b-25 of the Securities Exchange Act of 1934, as amended. The delay could not be eliminated without unreasonable effort or expense. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 will be filed as soon as practicable after the Company has completed the restatement process."<br /><br /><b>Feihe International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=ADY">ADY</a>) is currently trading at $9.63, down 9.50% for the year, and down 30.72% from the November 8 high at $13.90. The Trading China Tracker Score is -2 (Sell).<br /><br />Feihe has already announced full-year numbers in a press release, but the 10-K filing is still missing. The company expects to file its annual report by the end of the 15-day extension, or by March 31, 2011.<br /><br />"The registrant is unable to file its Annual Report on Form 10-K for the year ended December 31, 2010, within the prescribed time period because the information required for an accurate and full completion of the report, including but not limited to the financial statements that form a part thereof, could not be provided within the prescribed time period without unreasonable effort or expense. The registrant expects to file its Annual Report on Form 10-K as soon as practicable, and <b>in no event later than the fifteenth calendar day following the prescribed due date</b>."<br /><br /><b>Fuqi International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=FUQI">FUQI</a>) is currently trading at $3.29, down 48.44% for the year, and down 61.16% from the October 11 high at $8.47. The Trading China Tracker Score is UNDER REVIEW.<br /><br />The last quarterly or annual report that we have seen from FUQI was filed on November 9, 2009. Nasdaq has granted the company several extensions, the last of which expires on March 28, 2011. By that date the Company must file with the SEC <a href="http://www.sec.gov/Archives/edgar/data/1382696/000114420411003935/v208974_ex99-1.htm">all delayed reports and any required restatements</a>. It seems very unlikely that FUQI can comply with this request, which means that the stock might face a delisting from Nasdaq as early as next week.<br /><br />"The Registrant has also been unable to complete and file its Annual Report on Form 10-K for the year ended December 31, 2009 due to the time and effort required by the Registrant to conduct a review and analysis of the accounting errors, the impact of the accounting errors on its condensed consolidated financial statements, and preparation of the amended Quarterly Reports on Form 10-Q/A to present the Restatements, in addition to the time and effort required to complete the audit for the year ended December 31, 2009. In addition, due to the foregoing, the Registrant has been unable to prepare and file its Quarterly Report on Form 10-Q for the three months ended March 31, 2010, its Quarterly Report on Form 10-Q for the three and six months ended June 30, 2010, and its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2010, by their respective due dates. Due to additional time and efforts expended in an attempt to complete the Restatements and prepare and file the annual report for the year ended December 31, 2009 and quarterly reports for March 31, 2010, June 30, 2010, and September 30, 2010, the Registrant is unable to file its Annual Report on Form 10-K for the year ended December 31, 2010. The Registrant will file its Annual Report on Form 10-K for the year ended December 31, 2010 as soon as it is able; however, the Registrant is not able to provide a reasonable estimate as to such filing at this time, <b>which will not occur within the fifteenth calendar day after the prescribed due date</b> for such report."<br /><br /><b>Fushi Copperweld</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=FSIN">FSIN</a>) is currently trading at $8.73, down 1.69% for the year, and down 22.47% from the November 3 high at $8.47. The Trading China Tracker Score is 13 (Strong Buy).<br /><br />Similar to CBPO, Fushi Copperweld is also a former Frazer Frost client which changed auditors to KPMG (January 24), and now has to file for a delayed Annual Report. Short interest is high and as the stock is still trading at January levels, it has room to the downside if the 10-K doesn't come out clean or if the delay is longer than currently expected. The company announced preliminary results on March 11, but it is prudent to wait for the audited numbers with the Annual Report.<br /><br />"In the process of preparing our financial statements for the year ended December 31, 2010, management reevaluated the application of GAAP in certain past accounting treatments, which are non-cash and non-operating items. While it is unfortunate that these reconsiderations are causing a delay in our filing, we stress the fact that these are <b>all non-cash adjustments</b> related to various corporate-level account treatments and will not materially affect our non-GAAP, core operating results such as revenue, gross profit and operating income. The Company plans to file its Form 10-K for the year ended December 31, 2010 and publish financial fourth quarter and full year results as soon as practicable following the completion of this reevaluation. However, due to the time needed, we are not in a position to file our 10-K within the required time period."<br /><br /><b>Home System Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HSYT.PK">HSYT</a>) is currently trading at $0.14, down 94.40% for the year, and down 96.00% from the October 18 high at $3.50. The Trading China Tracker Score is 9 (Buy).<br /><br />HSYT filed for a 10-K extension a whole two weeks before the due date, which is unusual at best. The company gave only the standard explanation without going into detail: "Certain financial and other information necessary for an accurate and full completion of the Form 10-K could not be provided within the prescribed time period without unreasonable effort or expense." With all these uncertainties, HSYT is for gamblers only at this point.<br /><br /><b>HQ Sustainable Maritime</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=HQS">HQS</a>) is currently trading at $3.20, down 32.92% for the year, and down 36.89% from the January 7 high at $5.07. The Trading China Tracker Score is 6 (Hold).<br /><br />"HQ Sustainable Maritime Industries is unable to file its Report on Form 10-K for the year ended December 31, 2010 within the prescribed time period due to delays in compiling the information for the preparation of the financial statements. The Registrant <b>fully expects to be able to file within the additional time allowed</b> by this form."<br /><br /><b>Kingold Jewelry</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=KGJI">KGJI</a>) is currently trading at $2.55, down 37.50% for the year, and down 75.00% from the October 6 high at $10.00. The Trading China Tracker Score is 9 (Buy).<br /><br />"During the process of evaluating its internal control over financial reporting and completing the preparation of its consolidated financial statements, the Company plans to <b>amend and restate its third quarter 2010 financials</b> to reflect solely a non-cash stock compensation expense resulting from the issuance of 100,000 shares of restricted common stock in December 2010 pursuant to the terms of a pre-existing consulting contract. In connection with this adjustment, the Company has engaged a third party valuation firm to assist the Company and its auditors in properly valuing the compensation expense. It is expected that the final results of the valuation report will be available <b>no later than March 25, 2011</b>. The impact of this non-cash adjustment on the Company's net income is expected to be not more than $0.02 per share for the three and nine months ended September 30, 2010. As a result, the Company is unable to finalize its financial statements for the year ended December 31, 2010 until such results have been obtained. In connection with the Company's evaluation of its internal control over financial reporting, <b>the Company has identified some control issues that it is analyzing to determine if they rise to the level of material weaknesses</b> that would require disclosure in its Form 10-K for the year ended December 31, 2010."<br /><br /><b>ShengdaTech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SDTH">SDTH</a>) was last trading at $3.55, down 27.54% for the year, and down 44.95% from the November 8 high at $6.45. The Trading China Tracker Score is UNDER REVIEW.<br /><br />SDTH announced an investigation into "potentially serious" issues with its financials on March 15, and trading has been halted by Nasdaq shortly after. It could take months for SDTH to complete this investigation, and the wording of the announcement suggests that restatements are necessary.<br /><br />"On March 15, 2011, Shengdatech announced that it had appointed a special committee of the Board of Directors <b>to investigate potentially serious discrepancies and unexplained issues relating to the Company and its subsidiaries' financial records</b> identified by the Company's auditors in the course of their audit of the consolidated financial statements for the fiscal year ended December 31, 2010. The special committee is composed of the independent directors comprising the Company's audit committee. The audit committee retained O'Melveny & Myers LLP as independent outside counsel, which has initiated an internal investigation. The outside counsel to the committee has notified the Staff of the Securities and Exchange Commission of the commencement of the internal investigation. Given that the investigation only recently commenced, the Company cannot predict at this time whether that investigation will require any adjustments to its financial statements, and if so whether such adjustments will be material. Due to the pendency of the internal investigation, <b>the Company will not be able to file its Annual Report on Form 10-K in a timely manner</b>. The Company cannot at this time estimate when the internal investigation of the relevant issues will conclude. The Company intends to file the Form 10-K as soon as reasonably practicable."<br /><br /><b>Wonder Auto Technology</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=WATG">WATG</a>) is currently trading at $5.79, down 23.21% for the year, and down 49.66% from the November 9 high at $11.50. The Trading China Tracker Score is UNDER REVIEW.<br /><br />And another company that upgraded auditors to Big Four (PricewaterhouseCoopers) recently, and now faces a possibly long delay with their 10-K filing. Restatements for its financial statements all the way back to 2008 are to be expected, and WATG already said that they most likely won't make the extended deadline at the end of this month. <br /><br />"As previously announced on February 23, 2011, in connection with the preparation of its consolidated financial statements for the fiscal year ended December 31, 2010, Wonder Auto Technology concluded, that its financial statements as of and for the years ended December 31, 2008 and 2009, included in its Annual Report on Form 10-K for the year ended December 31, 2009, as well as the financial statements included in its Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30 during each of the years 2008 and 2009 should no longer be relied upon due to a cutoff error regarding timing of revenue in such periods. Additionally, the Company is still evaluating the impact of the cutoff-errors on its financial results for the year ended December 31, 2010 and on its internal control over financial reporting as of December 31, 2010. As a result, the Company is unable to complete its Form 10-K within the prescribed time period. The Company remains committed to completing its Form 10-K at the earliest possible time, but <b>does not currently anticipate its completion within the fifteen calendars</b> following the prescribed due date."The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com12tag:blogger.com,1999:blog-6154015141484451605.post-86669541834344600732011-03-20T19:11:00.001+00:002011-03-20T19:13:12.848+00:00Portfolio Changes - March 18, 2011<b>Agfeed Industries</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=FEED">FEED</a>) is currently trading at $1.97, down 33.00% for the year, and down 42.74% from the November 9 high at $3.44. The Trading China Tracker Score is -5 (Sell).<br /><br />Since we added FEED to our portfolio (November 5, 2010), the company <a href="http://finance.yahoo.com/news/AgFeed-Industries-Inc-prnews-928387781.html">posted disastrous 2010 results</a>. Large write-downs of its Chinese hog farms led to a Fourth Quarter loss of 42 cents a share, much worse than expected. FEED slashed its workforce by nine percent and did not give FY 2011 guidance. Related to the unacceptable performance, the company saw a <a href="http://www.sec.gov/Archives/edgar/data/1331427/000114420411009207/v211737_8k.htm">mass exodus of executives</a> in February. Both the Chairman of the Board and the President/CEO resigned from their positions.<br /><br />We are closing our position in the <a href="http://www.fixyou.co.uk/portfolio_china.php">China Model Portfolio</a> <b>for a loss of 37.86% or $1,892</b>. We are no longer betting on FEED being able to turn its business around in the foreseeable future. Additionally the stock <b><font color="#FF0000">did not pass</font></b> our initial safety/risk test in regards of corporate governance, credibility and investor protection.<br /><br /><b>China Housing & Land Development</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CHLN">CHLN</a>) is currently trading at $2.14, down 21.90% for the year, and down 41.21% from the January 7 high at $3.64. The Trading China Tracker Score is 8 (Buy).<br /><br />China Housing <a href="http://finance.yahoo.com/news/China-Housing-Land-prnews-2008313163.html">announced fourth quarter and full year earnings</a> on March 14, both pretty much in line with expectations. <a href="http://www.sec.gov/Archives/edgar/data/1303330/000114420411014432/v214214_10k.htm">Form 10-K for 2010</a> has been filed, and CHLN's Canadian auditor MSCM LLP attested the company effective internal control over financial reporting as of December 31, 2010. Guidance for 2011 has been issued, calling for about 50% revenue growth and a 140%-179% increase for total contract sales over 2010 numbers. Although we see room for improvement, the stock <b><font color="#008000">passed</font></b> our initial safety/risk test, and we are keeping the position in our portfolio with a target price of 6x 2011 earnings ($0.70) or $4.20.<br /><br /><b>China MediaExpress</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CCME">CCME</a>) is currently halted. Last available quote was $11.88, down 25.01% for the year, and down 50.44% from the January 28 high at $23.07. The Trading China Tracker Score is UNDER REVIEW.<br /><br />Trading in CCME will likely stay halted for a while, it is unlikely that the stock will be allowed to reopen on Nasdaq with the revelations of last week. We will sell the shares in our portfolio at the close of the first Friday the stock is trading again, as the rules for the portfolio do not allow us to liquidate the position at any different time. I would expect CCME to follow similar trading patterns as RINO when it reopens: a sharp drop at the open to sub-$5 levels, followed by a bounce driven by short covering and a slow fade from there on. It is very unlikely that long investors will see significant positive developments from here on, given the <a href="http://china.fixyou.co.uk/2011/03/chinese-fraud-is-widespread.html">magnitude of the disaster</a> that was unfolding last week.<br /><br /><b>China RuiTai International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CRUI.OB">CRUI</a>) is currently trading at $0.55, down 45.00% for the year and from the February 2 high at $1.00. The Trading China Tracker Score is 13 (Strong Buy).<br /><br />RuiTai is set to report full year numbers for 2010 by the end of March. Based on reported financials the stock is extremely cheap, but in the current environment it is prudent to wait for the 10-K filing before making an investment decision. We will apply our safety/risk test when the annual report is available, then review our portfolio position. <br /><br /><b>China XD Plastics</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CXDC">CXDC</a>) is currently trading at $6.14, up 13.07% for the year, and down 16.47% from the February 17 high at $7.35. The Trading China Tracker Score is 11 (Buy).<br /><br />China XD is also scheduled with their next annual report on or before March 31, 2011. The stock is holding up very well within the group of small cap Chinese companies, still posting nice gains of more than 13% for the year. Our initial safety/risk test came out inconclusive, while price action, institutional support, and management continuity is in favor of the company, we see risks in the ownership structure and recent lack of updates from management. We will review our position in early April when we should have a new 10-K filing.<br /><br /><b>ChinaCast Education</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAST">CAST</a>) is currently trading at $5.99, down 22.81% for the year, and down 25.04% from the November 9 high at $7.99. The Trading China Tracker Score is 5 (Hold).<br /><br />ChinaCast <a href="http://finance.yahoo.com/news/ChinaCast-Education-Reports-prnews-2401835933.html">reported strong earnings</a> last week, and guided for 21-23% revenue growth in FY 2011. The stock came under heavy pressure early last week, but recovered nicely with a 12% gain on Friday alone. The company <a href="http://finance.yahoo.com/news/ChinaCast-Education-prnews-2050003654.html">announced a large $50 million buyback program</a> for the next 12 months, and management seems committed to creating shareholder value. Our safety/risk test came back <b><font color="#008000">positive</font></b> with Deloitte Touche Tohmatsu (CCME's auditor) signing off on the financials (<a href="http://www.sec.gov/Archives/edgar/data/1261888/000114420411015304/v214529_10k.htm">10-K filing</a>). However, it should be noted that Deloitte identified material weaknesses and has expressed the opinion that CAST has not maintained effective internal control over financial reporting as of December 31, 2010. Those weaknesses are a "lack of sufficient skilled resources in the finance team to meet the demands of rapidly expanded businesses," and a "lack of contemporaneous documentation of certain decisions made by the Board of Directors." We believe that CAST should be able to address these issues successfully.<br /><br />I will complete the review of our China Model Portfolio positions next week, when I will hopefully have a bit more time to do the write-up. But as we can only make changes to the portfolio at Friday's close, the following positions will all be closed now:<br /><br /><b>Agfeed Industries</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=FEED">FEED</a>)<br /><b>Jade Art Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=JADA.PK">JADA</a>)<br /><b>New Energy Systems</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=NEWN">NEWN</a>)<br /><b>Sino Agro Food</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SIAF.PK">SIAF</a>)<br /><b>U.S. China Mining Group</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SGZH.PK">SGZH</a>)The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com11tag:blogger.com,1999:blog-6154015141484451605.post-19511009996347617452011-03-20T12:53:00.001+00:002011-03-20T12:55:50.525+00:00Chinese Fraud is WidespreadThe downfall of <b>China MediaExpress</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CCME">CCME</a>) has changed the landscape of U.S.-listed Chinese stocks forever. The events of last week, including developments at <b>China Agritech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CAGC</a>), <b>Subaye</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SBAY">SBAY</a>), <b>China Integrated Energy</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CBEH">CBEH</a>) and <b>ShengdaTech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=SDTH">SDTH</a>) prove that Chinese fraud on U.S. exchanges is much more widespread than I originally thought. Numerous trading halts initiated by the exchanges, and more details about the SEC investigation in Chinese reverse mergers, deal-makers and investment banks involved show that U.S. regulators are stepping up to address the issue. Even though we have always advised extreme caution when investing in this space, we have clearly been too optimistic going forward, put too much weight on auditor integrity (incl. Big Four) and third party due diligence (analysts, institutional investors). <br /><br /><b>China MediaExpress</b><br /><br />The battleground for longs versus shorts was China MediaExpress, a high profile self-proclaimed leader in the booming Chinese advertising industry that reported stellar quarterly results throughout 2010. The company was considered among the safest of the RTO/SPAC stocks based on a large number of indicators which supported the credibility of the company and its reported financials. CCME had a Big Four auditor (Deloitte Touche Tohmatsu) since 2009, a large institutional investor (CV Starr) that even increased its position in the stock last fall, consistently bullish analyst reports (Northland called it its Top Pick 2011, Global Hunter repeatedly released detailed research and raised price targets), and supposedly $170 million cash on its balance sheet. The company announced a share buyback program (although never executed) and promised to pay a dividend this spring.<br /><br />Despite all these bullish signs, short interest in the stock kept rising to staggering levels, even before Muddy Waters and Citron Research released their short reports. The warning signs were always there, both CCME longs and shorts were engaged in a fierce battle over details, but in the end this was a battle between short sellers, who wanted to profit from a collapsing share price, and the reputation of Deloitte, Starr, Global Hunter and other well-known names in the industry, backed by magnificent financial reports. Longs could easily argue that jumping on the Deloitte-Starr-GH bandwagon would be a much safer bet than following the short argument that all those big names got it totally wrong.<br /><br /><b>Now the battle is over</b>. Deloitte resigned as CCME's auditor. Dorothy Dong, the representative of CV Starr on China MediaExpress's Board of Directors resigned as well, and Global Hunter's senior analyst, Ping Luo, is no longer working for the firm. CCME's stock is halted indefinitely, without an auditor and CFO - Jacky Lam resigned as well - it is unclear when (if ever) we see another 10-K from the company, and the fallout of this scandal sent the average Chinese RTO stock down another 20% last week. <a href="http://www.sec.gov/Archives/edgar/data/1399067/000114420411015546/v215073_ex17-2.htm">Dorothy Dong's resignation letter</a> gives us a good account of what happened with China MediaExpress:<blockquote>As you know, numerous allegations of a serious nature relating to the conduct of certain members of CCME's management (and that of its subsidiaries) have come to light in the past several weeks. Specifically, by letter dated 3 March 2011, Deloitte Touche Tohmatsu issued a letter to CCME's Audit Committee detailing <b>numerous irregularities it encountered during its audit of CCME, including in particular, irregularities concerning the bank account balances</b> for CCME's PRC subsidiaries.<br /><br />Subsequently, by letter dated 11 March 2011 to the Audit Committee and the Board of Directors of CCME, Deloitte resigned as auditor of CCME, citing "no tangible process" had been made with respect to the issues raised in its 3 March 2011 letter, and stating that it had "<b>lost confidence in the representations of management</b> (which underpin any audit) ... and reliable financial reporting."</blockquote>What do we learn from this? CCME's cash balance is most likely massively overstated, and with that the likelihood that we have seen correct financial quarterly reports for 2010 is very low, as most of the cash is supposed to come from operating cash inflows last year ($30 million in Q3/2010 alone). When Deloitte now speaks of numerous problems "of a serious nature", it heavily devalues the quality of its own work over the past 16 months, and especially also the work of Starr and all the analysts we were supposed to rely on. The most plausible scenario is that CCME's founder, majority owner, Chairman and CEO Zheng Cheng, was deliberately defrauding investors with the sole purpose to enrich himself. <br /><br /><b>China Agritech</b><br /><br />Adding to this scandal is the story that is unfolding around <b>China Agritech</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CAGC</a>), another Chinese reverse merger that got heavily attacked by short sellers. The stock was halted by NASDAQ on March 14 before the open, and <a href="http://finance.yahoo.com/news/NASDAQ-Halts-China-Agritech-pz-3581862154.html">NASDAQ said trading will remain halted</a> "until China Agritech has fully satisfied NASDAQ's request for additional information." More details came to light after the halt, and all of them point to what I would call highly deceptive behaviour by the company:<br /><br />On March 13, China Agritech <a href="http://finance.yahoo.com/news/China-Agritech-Inc-Announces-prnews-2617191878.html">issued a press release</a>, announcing a delayed 10-K filing due to the formation of a special committee in order to "investigate certain allegations made by third parties with respect to the Company and certain related issues." The next day, right before the stock was halted, CAGC announced the <a href="http://finance.yahoo.com/news/China-Agritech-Inc-Dismisses-prnews-2895107606.html">dismissal of Ernst & Young Hua Ming</a> (another Big Four) as auditor, based on the management questioning Ernst & Young's independence and "<b>in order to give the public fair and truthful financial results</b>."<br /><br />The real reasons for both the formation of the special committee and the "dismissal" of Ernst & Young were hidden from investors. In fact it turned out that the "third parties" making allegations included Ernst & Young, and that the auditor threatened to resign if the company wouldn't correct its deceptive press releases. <a href="http://www.sec.gov/Archives/edgar/data/1166389/000114420411015802/v215259_8k.htm">An 8-K form, filed on March 18</a>, tells us a more detailed story of what has really happened at CAGC:<blockquote>"On March 13, 2011, the Company announced that it formed a special committee of its board in order to investigate certain allegations made by third parties with respect to the Company and certain related issues and that the Company would not be able to meet the its Form 10-K filing deadline. E&Y informed the Company that, in its view, there was a material omission of fact from the Company's press release relating to the formation of the special committee, as the press release did not specifically disclose that <b>the independent investigation was related to issues which were identified during the performance of the Company's year end audit</b>. E&Y further advised the Company's representatives that <b>E&Y may resign as the Company's auditors</b> if a revised press release was not issued. The Company, however, believed that the specific disclosure in the press release about the investigation combined with the disclosure of the indefinite delay in the 10-K filing, was a clear indication to the market that issues had arisen in connection with the annual audit which would have to be addressed.<br /><br />E&Y informed the Company that <b>the issues identified in performing their audit may, if further investigated, have adverse implications for the financial statements covering the three quarterly reports filed by the Company on Form 10-Q during 2010</b>, and advised the Audit Committee to inform the predecessor auditors of the issues identified, so that they can assess the impact on prior financial reports."</blockquote><b>Immediate Conclusion</b><br /><br />Last week was a game changer, and right now it is no longer possible to reasonably contain the risks when investing in Chinese small caps, especially reverse mergers and blank-check deals. The number of fraudulent companies in this space is much higher than a common sense approach would even have considered possible - maybe even higher than 50% - and <b>for a retail investor those risks are just too high</b> here. The only stocks we should consider for an investment, at any price, are those with a clean 2010 full-year audit backed by a tier one accounting firm. And even those are not free of fraud-risk.<br /><br />The shake-out will continue, we will see more Chinese RTO stocks imploding in the next few weeks. And, most importantly, the magnitude of fraud will force U.S. regulators to act swiftly. We have seen as many as five Chinese RTO stocks with an exchange-forced trading halt last week, and this trend will continue. Wall Street can not afford to be seen as a facilitator of systemic Chinese securities fraud, and investors in those stocks are simply not protected. <br /><br />We will make the necessary adjustments to our China Model Portfolio later today.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com21tag:blogger.com,1999:blog-6154015141484451605.post-54155958536638972972011-03-04T10:29:00.001+00:002011-03-04T10:30:24.057+00:00China Energy Recovery - Explosive Growth AheadIt doesn't happen very often that a pink sheets quoted Chinese microcap catches our attention, but <b>China Energy Recovery</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CGYV.PK">CGYV</a>) is quite special in many aspects. The company designs, manufactures and installs waste heat energy recovery systems for industrial customers, and is set to become a leader in its industry. When the recently initiated second phase of its expansion program is completed in 2012, CGYV's site will stand as the largest single facility for energy recovery systems in China. Phase One of this expansion has already been finished and CGYV's capacity for 2011 increased almost five-fold over 2010.<br /><br />China Energy Recovery's auditor is Big Four firm PricewaterhouseCoopers (PwC). This alone is extremely unusual for a tiny microcap with a book value of under $8 million (March 2010). Common sense tells us that this is not our typical pink sheets company when they engage a very expensive top tier auditor and especially also when PwC accepts them as a client. Since the engagement, PwC has carried out a complete review of CGYV's financials which resulted in restatements for 2008 and 2009 financials, and a long delay for the 2010 reports. This is how the formerly OTC-quoted stock ended on the pink sheets.<br /><br />The company is now moving to bring their SEC filings up to date by submitting the remaining quarterly reports for 2010. The <a href="http://www.sec.gov/Archives/edgar/data/1208790/000114420411012595/v213472_10q.htm">first quarter 10-Q</a> has been filed this week and we can expect the others to follow soon. With the 2010 annual report the company would be back in compliance with the reporting requirements and could get rid of its pink sheets status.<br /><br />The news flow over the past six months has been very positive:<br /><ul><li><b>September 16, 2010:</b> <a href="http://www.prnewswire.com/news-releases/cers-new-manufacturing-facility-on-track-for-phase-one-completion--operation-this-year-103068939.html">New Production facility announced</a>. Increases manufacturing capacity by 377% from 356,000 square feet to 1.7 million square feet. Another 100% expansion scheduled for 2012.</li><li><b>November 3, 2010:</b> PricewaterhouseCoopers completes restatements of 2008 and 2009 numbers. <a href="http://www.prnewswire.com/news-releases/china-energy-recovery-files-2009-form-10-k-106632328.html">Annual report (10-K) for 2009 filed</a>. $22.2 million in total revenue and net loss of $886,480 or $0.03 per share.</li><li><b>November 5, 2010:</b> <a href="http://www.prnewswire.com/news-releases/cer-signs-23-million-contract-for-two-heat-recovery-system-installations-in-china-106756698.html">$22.7 million contract</a> for two waste heat recovery systems announced. Scheduled for December 2011 and January 2012.</li><li><b>November 11, 2010:</b> <a href="http://www.prnewswire.com/news-releases/cer-will-install-11-million-waste-heat-recovery-system-for-wengfu-ltd-in-china-107219708.html">$10.9 million contract</a> for a heat energy recovery system announced. Scheduled for August 2011.</li><li><b>December 10, 2010:</b> <a href="http://www.prnewswire.com/news-releases/phase-one-of-cers-new-production-facility-is-completed-on-schedule-111671809.html">Company initiated phase two of its expansion plan</a> which will triple capacity when completed in 2012. Management notes that when complete CGYV's "site will stand as the largest single facility dedicated to the design and manufacture of energy recovery systems in China."</li><li><b>December 21, 2010:</b> <a href="http://www.prnewswire.com/news-releases/cer-obtains-45-million-loan-facility-112261309.html">CGYV secures $4.5 million loan facility</a> with Bank of China.</li><li><b>January 10, 2011:</b> <a href="http://www.prnewswire.com/news-releases/cer-wins-two-new-waste-heat-system-contracts-totaling-75-million-for-delivery-in-2011-113222359.html">$74.7 million contract</a> for two major waste heat recovery systems announced. Scheduled for October and December 2011.</li><li><b>January 19, 2011:</b> <a href="http://www.prnewswire.com/news-releases/cer-wins-42-million-us-contract-from-jiangsu-jihua-chemical-co-114217009.html">$4.2 million contract</a> for a waste heat recovery system announced. Scheduled for November 2011 delivery.</li><li><b>February 24, 2011:</b> <a href="http://www.prnewswire.com/news-releases/cer-wins-an-additional-75-million-in-new-contracts-for-2011-delivery-116849163.html">$7.5 million contract</a> for two waste heat recovery units announced. Scheduled for delivery in the third quarter and December 2011. <b>2011 contract total now exceeds $115 million</b>.</li><li><b>March 3, 2011:</b> <a href="http://www.prnewswire.com/news-releases/cer-doubles-revenue-to-41-million-in-first-quarter-2010-117348908.html">First Quarter 2010 10-Q filed with the SEC</a>. Reported revenue of $4.1 million (+212% YoY) and operating loss of $538,513 (-35% YoY).</li></ul>The additional capacity from the Phase One expansion came online in December 2010, so we can not expect much growth for the past year. As the company's CEO stated in a recent press release, "production constraints limited growth, a condition that persisted through fiscal 2010 while our new manufacturing facility was under construction." We should see 2010 total revenue come in between $20 million and $25 million, pretty much in line with 2009 results. But from now on the future looks very bright and the company should see explosive revenue growth.<br /><br />Trading China reached out to the company to clarify some open questions, and Simon Dong, financial controller of China Energy Recovery, was kind enough to respond:<blockquote><b>1. Can we expect the remaining 2010 quarterly reports in the near future?</b><br /><br />We do expect the remaining 2010 quarterly reports to be filed soon. The delay of Q1 is also due to restatement of 2009 figures took more than expected time.<br /><br /><b>2. Does the company plan to file their annual report within the deadline and regain fully reporting status this month?</b><br /><br />Yes, the Company strongly wish to file annual report within the deadline, we closely cooperate with our auditor, PwC to issue the report on time.<br /><br /><b>3. In the last update the company announced: "CER's 2011 contract total now exceeds $115 million." Can you give an estimate for how much of this revenue will be recognized in FY 2011?</b><br /><br />Most of the 115 million, we estimate about USD 100 million above will be completed in 2011.</blockquote>Reported revenue of $100 million for 2011 would <b>quadruple</b> the results for 2010 and 2009, explosive growth that won't be ignored by the market as the financial results are backed by a best-in-class auditor. And it won't end there. The Phase Two expansion, scheduled for 2012 completion, "will more than triple the size of the current facility," and with both stages complete, CGYV's "manufacturing capacity will exceed its original Shanghai-based capacity by a factor of 10."<br /><br /><b>Those numbers suggest that CGYV can grow from $22.2 million in revenue for 2009 to $100 million in 2011 and $200-250 million in 2013</b>. Long-term growth prospects for the energy recovery industry are excellent, as this technology serves two of China's main goals: lowering industrial pollution and reducing carbon emissions. We are adding CGYV to our <a href="http://www.fixyou.co.uk/portfolio_china.php">China Model Portfolio</a> today after the close.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com5tag:blogger.com,1999:blog-6154015141484451605.post-68226859455051919642011-02-26T13:32:00.001+00:002011-02-26T13:38:58.918+00:00Security Deletions on the OTC Bulletin BoardThere has been enormous confusion last week, surrounding the deletion of more than 1000 microcap stocks, including many Chinese ones, from the OTC Bulletin Board. The <a href="http://www.otcbb.com/asp/dailylist_detail.asp?d=02/22/2011&mkt_ctg=OTCBB">daily list of changes for the OTCBB</a> gives a reason for those deletions: "Failure to comply with Rule 15c2-11." Subsequently financial websites as Google Finance or Yahoo Finance will no longer list those securities as "OTC quoted", instead they will change the market segment to "Pink Sheets" or just "PINK" (example: Weikang Bio-Technology, <a href="http://www.fixyou.co.uk/tracker_details.php?s=WKBT.PK">WKBT</a>, <a href="http://finance.yahoo.com/q?s=WKBT.PK">Yahoo Finance</a>, <a href="http://www.google.com/finance?q=PINK%3AWKBT">Google Finance</a>). Additionally, Yahoo Finance and most brokers will no longer use the ending ".OB" for those stocks, but replace this indicator with ".PK" for the Pink Sheets or "Other OTC".<br /><br />What seems to be a negative development, a demotion for those stocks, is actually just a change of the quotation platform. There is absolutely no reason to worry for investors, those companies are still U.S. registered and fully reporting with the U.S. Securities and Exchange Commission (SEC). Price declines over the past week, following the deletion from the OTC Bulletin Board, are not justified, as the change was not caused by any action or inaction of the company, nor did the company fall short of its reporting requirements.<br /><br />Here is a little bit more about the background. The OTC Bulletin Board was owned and operated by the Financial Industry Regulatory Authority, or FINRA, the Wall Street regulatory authority. In late 2009, FINRA decided to part with it to focus on its core business, and in September 2010 the U.S. investment bank <a href="http://www.sec.gov/Archives/edgar/data/1054303/000093041310004782/c62748_ex99-1.htm">Rodman & Renshaw agreed to buy the trademark and website</a> in a deal that is expected to close this quarter. Rodman said it plans to expand its "quality services and products offered to the financial community," and wants to diversify its revenue base. <br /><br />But long before that sale, a competing platform, <b>OTC Markets Group</b>, had emerged as the dominant player for OTC securities. At the end of 2010, about 94% of all market maker quotes were published on OTC Markets Group's platform vs. just 6% on the FINRA Bulletin Board. Most brokers have migrated from the telephone-based OTCBB quotation system to the electronic OTC Markets platform since 2008, but for the time being almost all OTC securities were dually quoted on both platforms. That is changing now.<br /><br />A deletion notice on the OTC Bulletin Board website simply means that the stock has completely migrated to the OTC Markets platform and is no longer quoted on the OTCBB. However, OTC Markets is not recognized by most financial websites and brokers as "OTC", which led to the current "Pink Sheets" confusion. OTC Markets Group is a privately owned company that has its origins with the National Quotation Bureau (NQB). In June 2000, NQB changed its name to <b>Pink Sheets LLC</b> and introduced a financial information portal for unlisted securities under <a href="http://www.pinksheets.com/">www.pinksheets.com</a>. In April 2008, Pink Sheets LLC announced that it changed its name to <b>Pink OTC Markets Inc.</b>, and finally this year, <a href="http://www.otcmarkets.com/stock/OTCM/news?id=25870&b=y">on January 18</a>, they got rid of the "pink" completely to become <b>OTC Markets Group Inc</b>. The website has been renamed to <a href="http://www.otcmarkets.com/">www.otcmarkets.com</a> since, and free real-time quotes are offered for all fully reporting securities on that site.<br /><br />OTC Markets organizes OTC securities into three tiers, where <b>OTCQB</b>, their middle tier stands for "OTC-traded companies that are reporting with the U.S. Securities and Exchange Commission (SEC) or a U.S. banking or insurance regulator." A <a href="http://www.otcmarkets.com/reports/symbol_info.csv">.CSV file</a> of all stocks quoted on OTC Markets' platform is available online. Those tiers, also OTCQX and OTC Pink, are not recognized (yet) by most quotation websites and brokers, which makes it difficult for investors to identify an unlisted but fully reporting stock through a third party provider. Very few companies have informed investors about the platform change the way <a href="http://finance.yahoo.com/news/ChinaTel-Migrates-to-bw-3645792593.html">China Tel Group</a> did. <br /><br />Trading China has set up a list of all Chinese OTC Securities (as of February 25, 2011) and their current quotation platforms: <a href="http://www.fixyou.co.uk/otc_pink.php"><b>Chinese OTC Securities</b></a>The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com11tag:blogger.com,1999:blog-6154015141484451605.post-56885290287894010582011-02-21T13:47:00.002+00:002011-02-21T13:49:31.643+00:00China Watchlist for the Next 4 Weeks<b>Lihua International</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=LIWA">LIWA</a>) is currently trading at $10.82, down 3.74% for the year and down 17.09% from its November 11 high at $13.05. The Trading China Tracker Score is 9 (Buy).<br /><br />LIWA is currently trading at about 6x earnings for 2011 on a fully diluted basis. The company has a $15 million share repurchase program in place, a Top 10 auditor with a strong China team (Crowe Horwath), and additionally Deloitte has been contracted to do an internal control implementation and review. The stock has come under pressure from short sellers last year, and management responded with posting their Chinese SAIC filings on its website. Rodman & Renshaw confirmed the authenticity of those filings for both subsidiaries - Lihua Electron and Lihua Copper - and concluded that there are no inconsistencies between Lihua's SEC and SAIC filings. Rodman has a $20 target on the stock, and Global Hunter calls it "the single best pick in the US-listed China space."<br /><br />We are waiting for the 10-K filing in early March, and possible FY 2011 guidance which we expect to come in around $1.85 earnings per share. LIWA's short interest is among the highest in the sector, having reached over 27% of the float by the end of January. We wouldn't be surprised to see another attempt to attack the stock before the annual report is filed, which we would use to start building a position. <br /><br /><b>ChinaCast Education</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAST">CAST</a>) is currently trading at $7.02, down 9.54% for the year and down 12.15% from its November 9 high at $7.99. The Trading China Tracker Score is 5 (Hold).<br /><br />ChinaCast is in the post-secondary education (universities) and e-learning business in China. Nothing much happened to CAST's stock price in the last two years. The stock closed in the $7-8 range both 2009 and 2010 and is now still trading at this level. But the company looks rock-solid and I wouldn't be surprised to see the stock finally breaking out to the low double digits this year. <br /><br />We asked the company for a comment on the ongoing credibility crisis in the US-listed China sector:<blockquote><i>Trading China:</i> Can you reassure investors that your company is not a possible target for the SEC investigation?<br /><br /><i>ChinaCast:</i> When ChinaCast was originally formed and did a Series A investment with Intel Capital and Hughes back in 2000, our US investors mandated that we use a Big 4 auditor (in this case, Deloitte Touche-DT) from day one and we've been using DT now for over 10 years. We actually went public via a traditional IPO on the Singapore Stock Exchange back in May 2004, which believe me is a much more vetted process than the reverse merger and in some cases IPO process to get listed on US exchanges. While we did do a reverse merger to move our listing from Singapore to the US, it was through a public tender offer process that was highly scrutinized by the Singapore Stock exchange regulators, the SEC, Deloitte, as well as the shareholders of both companies. <br /><br />We are now a Delaware listed company (fully audited 10K reporting) and have been Sarbanes-Oxley 404 compliant for the past 3 years. I'm not sure how many other PRC companies listed in the USA file fully audited form 10K, have a Big 4 firm as their auditor for the past 10 years and are SOX 404 compliant but probably less than 10%. Our management team have a long, successful history of working in global multinational companies and have run other publicly listed companies and we have a very experienced, shareholder friendly board of directors. <br /><br />In addition, the senior management team and board have purchased approximately $9.5M worth of common stock during the past year. We believe that is a clear differentiator and if any regulatory body were evaluating targets we believe this would send a clear message on where management stands in its conviction of the business and the numbers. With that being said, we also strongly welcome the opportunity to host investors and analysts to our corporate facilities, network operations centers and universities in China to meet our executives and to conduct due diligence at our facilities. <i>(Michael J. Santos, President-International, ChinaCast Education Corporation)</i></blockquote>We are adding CAST to the <a href="http://www.fixyou.co.uk/portfolio_china.php">Trading China Model Portfolio</a> today.<br /><br /><b>Watchlist for the Next Four Weeks:</b><br /><img src="http://www.fixyou.co.uk/images/20110220_1.png" width="813" height="259" border="0"><br /><img src="http://www.fixyou.co.uk/images/20110220_2.png" width="813" height="256" border="0"><br /><img src="http://www.fixyou.co.uk/images/20110220_3.png" width="813" height="258" border="0"><br /><br /><b>Model Portfolio Changes:</b><br /><br /><b>Lotus Pharmaceuticals</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=LTUS.OB">LTUS.OB</a>) is currently trading at $1.84, down 28.96% for the year and down 38.26% from its November 10 high at $2.98. The Trading China Tracker Score is 14 (Strong Buy).<br /><br />We are <b>closing our position</b> here for a <b>loss of 1.08% or $52</b>. The ongoing discussion about the expensive land purchase in Inner Mongolia will likely hang over the stock until the land is actually sold. We believe LTUS will continue to trade on depressed multiples for the coming months.<br /><br /><b>Trina Solar</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=TSL">TSL</a>) is currently trading at $29.41, up 25.57% for the year and down 7.78% from its October 14 high at $31.89. The Trading China Tracker Score is 8 (Buy).<br /><br />Trina Solar is set to report earnings this Tuesday. While we expect another beat and raise quarter, we also believe that the focus will shift to H2/2011 where solar bears will argue big oversupply pressure will be looming. Most solar stocks had a stellar year so far and a pullback is likely, especially after market leader First Solar (FSLR) will report on Thursday. First Solar's stock is massively overvalued compared to its Chinese peers and an expected sharp drop after the Thursday report won't leave the Chinese names unaffected. We are <b>closing our position</b> for a <b>gain of 24.04% or $1,197.00</b>.<br /><br /><b>JinkoSolar</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=JKS">JKS</a>) is currently trading at $29.67, up 47.46% for the year and down 28.94% from its November 4 high at $41.75. The Trading China Tracker Score is 11 (Buy).<br /><br />The second solar stock we are selling today is Jinko Solar, a relatively new player in the sector with a less established customer base and higher vulnerability to rising raw materials prices. JKS had a great run, but for reasons explained in the TSL paragraph, we feel it's prudent to take profits here. We are <b>closing the position</b> for a <b>gain of 25.18% or $1,253.00</b>.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com6tag:blogger.com,1999:blog-6154015141484451605.post-61208312995046183362011-02-19T13:55:00.002+00:002011-02-19T14:00:13.017+00:00Prepare Yourself for the 10-K SeasonWe are at this point in time again! The sector of U.S.-listed China stocks has reached new lows, the sentiment couldn't be worse, most longs have been scared away, sitting on the sidelines, and shorts are looking for new trading ideas on a daily basis. The sector has been demonized by a group of self-proclaimed "research firms" nobody has ever heard of before 2010, including <a href="http://www.muddywatersresearch.com/">Muddy Waters LLC</a>, <a href="http://jcapitalresearch.com/">J Capital</a> or <a href="http://lucasmcgeeresearch.com/">LM Research</a>. And influential financial media like Barron's, TheStreet.com or CNBC are joining the fun by covering the China sector with an almost exclusively negative bias. <br /><br />This development doesn't come as a surprise, though. As I wrote back in November (<a href="http://china.fixyou.co.uk/2010/11/preparing-for-rino-fall-out.html">Preparing for the RINO Fallout</a>), the downfall of RINO International (<a href="http://www.fixyou.co.uk/tracker_details.php?s=RINO.PK">RINO</a>) set a precedent of Chinese fraud on the NASDAQ and would likely be exploited to the utmost degree. You can bet your house on the fact that every serious short seller group on the planet spent the month of December digging holes into other Chinese companies' business models and financial statements, and from January on the frequency of new short attacks has increased accordingly. Some of the assaults were pretty laughable (<a href="http://www.fixyou.co.uk/tracker_details.php?s=YONG">YONG</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CAST">CAST</a>), while others raise valid points and can not just be shrugged off by investors (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CAGC">CAGC</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CEU">CEU</a>). <br /><br />To be clear, there are many companies in the China space that should never have become public. Most have massive transparency issues, many are not entirely truthful about their businesses, and some are outright fraudulent, including several names the market has probably not uncovered yet. There is no doubt that we will see more Chinese stocks following RINO to the pink sheets, go dark entirely, or have to face regulatory pressure incl. SEC investigations, auditor and management resignations, major restatements and lawsuits. Cautious investors who don't have the time or means to dig through those companies' histories, financials and business models, should probably avoid the sector for the time being.<br /><br />We should appreciate the short sellers' efforts as they help clearing up the space, help to distinguish the quality stocks from those that share similar traits with RINO. Of course this is not their intention - the only thing they want is making money, and we have seen many allegations that were completely unfounded or even based on seemingly manufactured documents - but the outcome will nevertheless be a better environment for investing in U.S.-listed China stocks, as most companies have to go out of their way to prove they are legit, credible and transparent. <br /><br />Now we are at this point again where the whole group is in an over-correction. Liquidity has dried up, demand is at record lows, fear and uncertainty at record highs. The last time we reached these levels was back in September 2010 when the focus was on stocks like Orient Paper (<a href="http://www.fixyou.co.uk/tracker_details.php?s=ONP">ONP</a>) and China-Biotics (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CHBT">CHBT</a>). Back then I concluded that "the months-long sell-off in U.S.-listed China stocks has created unreasonable or even ridiculous valuations for many highly profitable high-growth companies, and the market will recognize it as soon as the sentiment changes and big money comes back" (<a href="http://china.fixyou.co.uk/2010/09/dont-be-afraid.html">Don't Be Afraid</a>).<br /><br />Trading China established a <a href="http://www.fixyou.co.uk/portfolio_china.php">Model Portfolio</a> on that day (September 24, 2010), and this <b>portfolio is up 32.18%</b> since, in less than five months. Don't believe anyone who is trying to tell you that there is no money to be made for longs in China stocks, you have the proof right there. Naturally in this environment, not all our positions were winners - we have been wrong at times in the past and we will be wrong with some of our picks in the future. But we surpassed our goal of beating the general U.S. markets with a balanced China portfolio of fundamentally solid picks and speculative growth ideas by a wide margin.<br /><br /><b>Annual Reports</b><br /><br />Should we put our money to work now? Yes and no! Yes only if you have done the kind of extensive diligence that makes you feel comfortable enough in the business model and management, corporate governance and underlying fundamental models and growth prospects of your pick. This is not the time to proceed with a valuation-only approach, it is all about if <b>you</b> can believe the numbers or not. If you haven't done your work then you probably shouldn't invest now, instead use the time to prepare yourself for the upcoming 10-K season. Most China stocks have a regular fiscal year so they are scheduled to file their 10-K's by the end of March. Those annual reports will be audited, and you will see if the auditor signs off on the 2010 numbers, where until now you have only the company's word for how its business was doing.<br /><br />Here lies both a <b>major risk and an opportunity</b>. Many Chinese companies have announced auditor upgrades late in 2010, mostly to the Big Four, in an attempt to increase transparency and strengthen credibility after the year of turmoil in the space. Those new auditors haven't done much work yet, and their reputation is on the line with the ongoing fraud discussion, a fact I believe those firms are very well aware of. That leads to the assumption that top auditors will run many additional procedures for the full-year audit and won't sign the report quickly. This should be true not only for the Big Four, but also for BDO, Baker Tilly or Crowe Horwath.<br /><br />The major risk lies in a delayed annual report. Any company that files for an extension without giving a clear time frame will likely see its stock getting destroyed, as the automatic assumption will be that the auditor found severe problems that made it impossible to finish the audit on time. We just have to look back at FUQI or DYP to see the results of a non-filing for investors. Should we get many of those delays we will likely see even more pressure across the entire group of U.S.-listed China stocks.<br /><br />But if the 10-K is filed on time next month, the 2010 audit completed, the interim quarterly results confirmed, and if no restatements are necessary, then we investors can in fact benefit from the increased pressure on the auditors. A tier one firm that signs off on the numbers of a small cap China stock, in the midst of this "China Fraud" hurricane, is vouching for the accuracy of those financials with their good name. And reputation means everything in this business!<br /><br /><span style="font-weight:bold;">Prepare yourself for the annual reports!</span> If you are using a value-oriented approach to investing, check and double-check the value you see in your company. Don't just go for EPS projections and the like, try to prove that the business model works, use more sources than just your company's filings. Then try to get comfortable with the numbers you find. Do reported profits and margins, projected growth and earnings make sense to you? How do they compare to the industry average, to peers listed on domestic exchanges? What about capital resources, recent financings, does the management seem competent to you? Have there been past issues that are not yet fully resolved?<br /><br />The bar has to be elevated for China stocks, and if you find several names that you are comfortable with then my approach would be to start building a position in those stocks over the next four weeks on significant dips or general weakness in the sector. But don't use up all your powder as the near term catalyst will be the filing of the annual reports. High-quality, low-valuation stocks that got the green light from their tier one auditor should see significant price appreciation this spring. This is where the big opportunity lies now.<br /><br />We will make several changes to the <a href="http://www.fixyou.co.uk/portfolio_china.php">China Model Portfolio</a> this weekend.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com23tag:blogger.com,1999:blog-6154015141484451605.post-73656008785130262102011-02-13T19:55:00.002+00:002011-02-13T20:03:10.127+00:00RedChip - Tomorrow's Blue Chips Turned Pink<a href="http://www.redchip.com/">RedChip Companies</a> is an investor relations firm that has become very popular with small cap Chinese stocks. The majority of the 31 clients that are <a href="http://www.redchip.com/research/researchmain.asp?page=coverageuniverse">currently listed</a> on RedChip's website are Chinese, among them several names that are listed on a national exchange - such as <a href="http://www.fixyou.co.uk/tracker_details.php?s=AMCF">AMCF</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=BEST">BEST</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CDM">CDM</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CELM">CELM</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CHNG">CHNG</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CIL">CIL</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CWS">CWS</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=DHRM">DHRM</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=KGJI">KGJI</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=LLEN">LLEN</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=LPH">LPH</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=NIV">NIV</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=RCON">RCON</a>, and <a href="http://www.fixyou.co.uk/tracker_details.php?s=ZSTN">ZSTN</a> - but also many OTC-quoted stocks as <a href="http://www.fixyou.co.uk/tracker_details.php?s=BFAR.OB">BFAR</a>, CBLY, CECX, CHCC, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CHNC.OB">CHNC</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=CMDI.OB">CMDI</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=LTUS.OB">LTUS</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=SGAS.OB">SGAS</a>, <a href="http://www.fixyou.co.uk/tracker_details.php?s=WEMU.OB">WEMU</a>, and <a href="http://www.fixyou.co.uk/tracker_details.php?s=WKBT.OB">WKBT</a>.<br /><br />RedChip began in 1992 as a small-cap research firm, and <a href="http://www.redchip.com/about/aboutmain.asp">praises itself</a> as having discovered <b>Starbucks</b> (SBUX) and <b>Nike</b> (NKE) back in the days before they became 'blue chips', accordingly the firm's slogan is "Discovering Tomorrow's Blue Chips Today"! Its website contains enthusiastic testimonials by several past and present clients, and also impressive looking <a href="http://www.redchip.com/about/aboutmain.asp?page=charts">performance charts</a>. And those very charts prompted this research article.<br /><br /><b>Longwei Petroleum</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=LPH">LPH</a>) is an oil storage operator in Shanxi province that is currently trading at $2.49 or a measly P/E-ratio of under 4. RedChip's performance chart reveals that their campaign for the stock began in December 2008 when it was trading at $0.20 and the stock is "up 1875%" at $3.95, the all-time high reached on November 8, 2010. Funny enough their campaign started exactly at LPH's all-time low, the stock has never traded below 20 cents, I call that perfect timing. RedChip's performance chart ends in November 2010, so it doesn't show the 37% drop in the last three months.<br /><br />Another example of misleading performance charts is the one for <b>Kingold Jewelry</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=KGJI">KGJI</a>). According to this chart, RedChip started their campaign at a price of $8.00 and notes "up 49%" for performance as the stock reached a high of $11.95 shortly after. The KGJI chart presented ends in December 2010 when the stock was trading just below $7.00, however with RedChip's logic the performance is still "up". KGJI - still a client of the firm today - is currently trading at $2.84, significantly below the $8.00 start price. <br /><br />I began to get really interested in RedChips track record, but I couldn't find a list of their past clients on their web presence. But anything that has ever been published on the internet can still be found with a little effort. So let's have a look at yesterday's "blue chips for tomorrow", and how they passed the test of time. <br /><br /><b>Tomorrow's Blue Chips as of August 22, 2008:</b> (<a href="http://web.archive.org/web/20080822152409/http://www.redchip.com/visibility/featuredStocks.asp">Reference Link</a>)<br /><br /><img src="http://www.fixyou.co.uk/images/redchip_2008.png" width="400" height="704" border="0"><br /><br />Out of RedChip's 32 clients from August 2008, 10 (31%) have now been demoted to the pink sheets. 5 stocks (16%) are trading significantly higher now with ZAGG being RedChip's biggest success. I haven't checked how much of the 10-fold rise can be attributed to RedChip's work, depends on for how long ZAGG was a client, but let's not nitpick here as anyone who purchased the stock during RedChip's reign has a big winner now. However, those are the exception from the rule. 24 out of 32 stocks (75%) are now trading significantly lower, and more than 40% (13 stocks) have lost more than 90% of their value - 15 stocks (47%) are trading at a share price below 10 cents, 10 stocks (31%) at or below a penny. <br /><br /><b>Tomorrow's Blue Chips as of August 20, 2007:</b> (<a href="http://web.archive.org/web/20070820230341/http://www.redchip.com/visibility/featuredStocks.asp">Reference Link</a>)<br /><br /><img src="http://www.fixyou.co.uk/images/redchip_2007.png" width="400" height="495" border="0"><br /><br />The performance for RedChip's 2007 clients could hardly be worse. Yes, there is one stock - <b>China Kangtai Cactus</b> (<a href="http://www.fixyou.co.uk/tracker_details.php?s=CKGT.OB">CKGT</a>) - that is not red, but it's up only a measly 8.5% in the past 3 1/2 years. Everything else is blood red, 55% of RedChip's clients (12/22 stocks) have lost 90% of more of their value, 50% have been demoted to the pink sheets, 10 stocks are trading below 10 cents, and 6 stocks (27%) under a penny. <br /><br /><b>Tomorrow's Blue Chips as of August 31, 2006:</b> (<a href="http://web.archive.org/web/20060831071414/http://www.redchip.com/visibility/featuredStocks.asp">Reference Link</a>)<br /><br /><img src="http://www.fixyou.co.uk/images/redchip_2006.png" width="400" height="454" border="0"><br /><br />And for 2006 the returns don't look any better: 19 out of 20 stocks are red, and a whopping 80% have lost more than 90% of their value. You find 65% of those wannabe-Blue Chips (13 stocks) on the pinks today, 60% are trading below a penny or have since de-registered their shares for a total loss.<br /><br />I must confess that I would have never expected such a disastrous picture. Had I thrown some darts on all the available ticker symbols, I am sure I'd found a group of stocks that would have outperformed RedChip's past clients by a wide margin. To be fair, most of those names have probably suffered their steepest losses after the investor relations campaign has ended, but that is not the point here. A company that hires an investor relations firm wants to get their story out to the world, to retail investors, brokers, hedge funds and institutions. In the end the performance of its business will determine the performance of its shares. If there is no story worth telling then a credible IR firm should probably not take the account in the first place.<br /><br />Now that we have seen what happened to all those "blue chips for tomorrow" of the past, I am getting a tad concerned about the names on RedChip's list of current clients. Is it reasonable to assume that the company has learned from past mistakes and screens potential new clients for quality before they take on the account? Time will tell, I guess.<br /><br />It would be interesting to compare RedChip's performance to its competition from other investor relations firms. Maybe someone wants to take over that task, I am seeing red already from all those -90% results.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com14tag:blogger.com,1999:blog-6154015141484451605.post-44257213398072980702011-02-11T10:57:00.001+00:002011-02-11T11:00:48.270+00:00Yongye International (YONG) - Truly GoodIn a ridiculous attempt to damage Yongye's reputation, blogger Ian Bezek - whose bio says he works in distressed real estate - published an <a href="http://seekingalpha.com/article/251103-yongye-international-why-this-stock-s-story-is-too-good-to-be-true">article on Seeking Alpha</a>, where he claims that the company's fertilizer "probably doesn't work." His primary argument for why YONG shouldn't be trusted was the large number of Yongye-branded stores: "How on earth could you open 20,000 stores, more than 40 each day, with only 399 workers? Are you familiar with any other companies that can grow so rapidly without hiring more workers?"<br /><br />What the author fails to realize - or maybe leaves out intentionally to support his short thesis - is that Yongye neither opens and owns, nor staffs those stores. All 20,000 stores are independently owned, Yongye does not have any employees working in those stores, instead they are Yongye-branded with shelving, window signs and displays to support the sale of Shengmingsu, the fertilizer product. YONG responded to Bezek's article in a <a href="http://en.prnasia.com/pr/2011/02/07/110104511.shtml">press release</a>, and explains that "all of our branded stores are existing agriculture stores in rural villages. As such, no stores need to be "opened." These are existing stores recruited to join our distribution network. In addition to selling Yongye's products, these stores also carry other agriculture products such as seeds, pesticides, and fertilizers. The store recruiting work is primarily driven by thousands of staff from our various levels of distributors."<br /><br />Now everyone who has ever looked into YONG's business model could have spotted all the mistakes in Ian Bezek's piece instantly. That includes Seeking Alpha editors, who have confirmed the article for publishing and distribution. Could it be that China bashing articles generate the most page views these days? The only authority Ian Bezek got came from getting published on Seeking Alpha, and the editors there should be aware of their potentially <b>market moving</b> influence, and check submissions for basic mistakes that are very easy to spot. <br /><br />YONG is down 6% for the week. We are in an environment where momentum traders hit any China stock the very moment a negative article is published. Most of them don't even know the company's name, nor do they have any idea about its business model. I can't blame them, this strategy was very profitable in the past, and they get served by short sellers with a new "hit piece" almost on a daily basis. However, when the effect of Bezek's article faded, YONG got hit by a downgrade from Brean Murray. The firm removed their price target, and downgraded the Chinese fertilizer sector to HOLD, citing "severe cold weather and serious droughts" that have hit China since late 2010.<br /><br />Brean Murray concluded that while they are "impressed by Yongye's fast top-line growth and success in improving operating cash flow," they believe "it's difficult for a fertilizer company to be immune to natural disasters and doubt YONG's ability to maintain a triple-digit revenue growth rate in the face of tough weather conditions." But Brean Murray is alone with this view. Yongye <a href="http://finance.yahoo.com/news/Yongye-Internationals-prnews-4205952167.html">issued a statement</a> saying that their fertilizer is actually <b>helping crops survive Northern China's current drought conditions</b>, and one important benefit of the product is to help plants counteract the effects of water deprivation.<br /><br />The company announced that Shengmingsu was purchased by some county level governments in northern provinces including Hebei, Shanxi, Shandong and Xinjiang to assist local farmers in combating the conditions. Yongye said "in recent months we have continued to see strong demand from our distributors, who are actively promoting our products as an effective nutrient product for local farmers to <b>counteract the drought</b>."<br /><br />Yongye's peer China Green (CGA) <a href="http://www.sec.gov/Archives/edgar/data/857949/000114420410048272/v196048_10k.htm">lists the benefits</a> of this group of coal-based liquid fertilizers as "to stimulate growth, yield, and <b>protect plants from drought</b>, disease and temperature damage while improving soil structure and enhancing soil fertility.The Travellerhttp://www.blogger.com/profile/17122257677784990244noreply@blogger.com174