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S-Chip Firms Rapidly Collapsing Amidst Debt And Fraud
- Thread starter SNAblog
- Start date
Came across an article in Bloomberg that the problem is also happening in the US.
http://www.businessweek.com/magazine/content/11_04/b4212058566865_page_7.htm
Worthless Stocks from China
(page 7 of 7)
January 17, 2011
Investors also dumped shares of companies that used Rino auditor Frazer Frost, including Harbin Electric, which Bird had shorted. Harbin dropped 15 percent in two days after trading in Rino shares was halted.
A couple of days later, governance research firm Audit Integrity, which rates almost 20,000 public companies, warned U.S. investors about Chinese stocks listed in the U.S. Its system for scoring companies on 100 different accounting and governance metrics had been turning up poor ratings, often a sign that companies are manipulating their numbers, says Audit Integrity's chairman, James A. Kaplan. "I noticed this issue well over a year ago," he says. "But in all candor, no one cared because of the brand of China. China was flying high. If it was branded as a Chinese company, it must mean it was going to be good and make money."
"As these companies are scrutinized, investors will uncover the facts behind the 'Chinese Curtain,' " Kaplan wrote in a Dec. 3 report. "Many of these stocks may prove to be valueless."
Still, there are believers. Bill Wells of Memphis-based Pope Asset Management, a major investor in Sky One and other reverse merger companies, says the China investment thesis still holds. "We see China, and correctly so for the last few years, as the major country with the largest amount of growth," says Wells, whose firm manages about $650 million. It started buying reverse merger Chinese companies in 2005 after large-cap Chinese stocks got expensive. "If you can work through these corporate governance issues, the valuations and the earnings growth on a lot of these companies look pretty attractive," he says. According to SEC filings, Pope Asset held 1,040,224 shares in Sky One as of June 30, 2010. As of the end of September, the fund owned 723,647 shares.
Jeff Papp, a senior analyst for the $300 million Oberweis China Opportunities Fund, which has less than 5 percent invested in reverse merger stocks, is also cautiously positive. "Right now, the whole group is trading at levels implying that they are all frauds, but those who can tell the difference will hit some home runs," he says. "We're either never going to see any of these types of Chinese companies listing here again, or we may be near a bottom in terms of valuations."
Bird did not vacation in New Zealand this past Christmas. Instead he was serenaded by the sound of waves while in a Hawaii beach rental, and he heard only good news from his short-selling experiments. Sky One's shares retreated 69 percent in 2010, and Bird put $500,000 of his $1 million-plus in profits into a startup involved in cancer drug research. His suit against Sky One's auditors drags on. Bird is still short 175,000 shares of the Chinese company and hopes the next salvo will come from the SEC. The commission did not respond to two requests for comment on this story. The SEC's Ma declined to comment.
"The story is not that murky at all. Sky One is a fraudulent company, and all the ticks on the dog are trying to make as much money as they can," says Bird. "When you know the stock is going broke, they're crooks, the SEC is going after them—where are you going to find a better short than that?" What Bird's not so clear on is why other investors don't see things the way he does, saying: "It's unbelievable how the sucker born every minute keeps on wanting to line up and throw their money at these 'opportunities of a lifetime.' "
cont'd at http://www.businessweek.com/magazine/content/11_04/b4212058566865_page_7.htm
http://www.businessweek.com/magazine/content/11_04/b4212058566865_page_7.htm
Worthless Stocks from China
(page 7 of 7)
January 17, 2011
Investors also dumped shares of companies that used Rino auditor Frazer Frost, including Harbin Electric, which Bird had shorted. Harbin dropped 15 percent in two days after trading in Rino shares was halted.
A couple of days later, governance research firm Audit Integrity, which rates almost 20,000 public companies, warned U.S. investors about Chinese stocks listed in the U.S. Its system for scoring companies on 100 different accounting and governance metrics had been turning up poor ratings, often a sign that companies are manipulating their numbers, says Audit Integrity's chairman, James A. Kaplan. "I noticed this issue well over a year ago," he says. "But in all candor, no one cared because of the brand of China. China was flying high. If it was branded as a Chinese company, it must mean it was going to be good and make money."
"As these companies are scrutinized, investors will uncover the facts behind the 'Chinese Curtain,' " Kaplan wrote in a Dec. 3 report. "Many of these stocks may prove to be valueless."
Still, there are believers. Bill Wells of Memphis-based Pope Asset Management, a major investor in Sky One and other reverse merger companies, says the China investment thesis still holds. "We see China, and correctly so for the last few years, as the major country with the largest amount of growth," says Wells, whose firm manages about $650 million. It started buying reverse merger Chinese companies in 2005 after large-cap Chinese stocks got expensive. "If you can work through these corporate governance issues, the valuations and the earnings growth on a lot of these companies look pretty attractive," he says. According to SEC filings, Pope Asset held 1,040,224 shares in Sky One as of June 30, 2010. As of the end of September, the fund owned 723,647 shares.
Jeff Papp, a senior analyst for the $300 million Oberweis China Opportunities Fund, which has less than 5 percent invested in reverse merger stocks, is also cautiously positive. "Right now, the whole group is trading at levels implying that they are all frauds, but those who can tell the difference will hit some home runs," he says. "We're either never going to see any of these types of Chinese companies listing here again, or we may be near a bottom in terms of valuations."
Bird did not vacation in New Zealand this past Christmas. Instead he was serenaded by the sound of waves while in a Hawaii beach rental, and he heard only good news from his short-selling experiments. Sky One's shares retreated 69 percent in 2010, and Bird put $500,000 of his $1 million-plus in profits into a startup involved in cancer drug research. His suit against Sky One's auditors drags on. Bird is still short 175,000 shares of the Chinese company and hopes the next salvo will come from the SEC. The commission did not respond to two requests for comment on this story. The SEC's Ma declined to comment.
"The story is not that murky at all. Sky One is a fraudulent company, and all the ticks on the dog are trying to make as much money as they can," says Bird. "When you know the stock is going broke, they're crooks, the SEC is going after them—where are you going to find a better short than that?" What Bird's not so clear on is why other investors don't see things the way he does, saying: "It's unbelievable how the sucker born every minute keeps on wanting to line up and throw their money at these 'opportunities of a lifetime.' "
cont'd at http://www.businessweek.com/magazine/content/11_04/b4212058566865_page_7.htm
Another reason why these highest paid ministers in the world are grossly overpaid and do not deserve the shameful amount they pay themselves.
Now with the previous CEO and one of the architects of the S-chips with Temasek, whats going to happen to our public funds?
Instead of going for quality, we mass import low quality Pinoys, Indians and PRC's with fake degrees.
