The new big thing around the internet is raiding the shares of Chinese based stocks. It’s all the rage, really. From Citron to Muddy Waters to Zerohedge to all of the little ancillary sites in between; people are bottom barreling these stocks, declaring them to be “the next Enron.” All of them use Seeking Alpha as a convenient little conduit, as the fuckers from SA have Yahoo finance access and a strong google search presence.
In general, short sellers do a great service for the market, unveiling fraud and acting as shareholder police, well sort of. Naturally, like all vocations, manipulation and outright criminality taint the pool from time to time, especially when big money is involved. It is my belief that the people who taint the pool of a just and worthy cause are 10x worse than the criminals they are purporting to admonish. They are equal to crooked cops who serial kill on the side or firemen who commit arson.
Enter Mr. Little
Mr. Little is the author and whiz behind Citron Research, a website dedicated to unveiling fraud in the market place, a worthy endeavor indeed. Back in the old days, they were called Stock Lemon. Much to his chagrin, I know a lot of people who made a fortune betting against him, long IOC, seeing the stock trade up 7x in the past 3 years–as Citron panned it every 10 points up. These guys have a history of moving stocks wildly, with their long, drawn out, professional looking, reports.
On 11/15, Citron, with the help from the homo-hammers from Seeking Alpha, posted an article, ripping into BORN, titled:
How China Borun Has Exaggerated Its Financial Performance
Ooh, catchy, right? The gist of the article is that he (Mr. Little) has seen BORN’s SAT docs, filed in China, courtesy of the “Geo Guys,” referencing some bullshit message board type forum website. He asserts: “ Shandong Borun’s revenues, income tax and net income for 2008 and 2009 are significantly understated in its filings with the SAT.” Unfortunately, he does not let anyone actually see the documents. Conveniently, they are “not his,” but belong to the “Geo Guys.” Right away, this raised an eyebrow with me and I started to accumulate the stock, from the low to mid 12’s.
Keep in mind, when he posted this garbage, the shares were trading @ $14.42. Within two trading days, the story helped shed more than 23% of BORN’s market cap.
Enter a Little Liar
With more than 20% of BORN‘s shares sold short, post RINO debacle, short sellers have a keen interest in where this story is going, so they post in the Seeking Alpha comments section, like small trolls in a knoll made from jelly rolls (no idea what that meant, bear with me). Remember, the whole basis around the Citron report, aside from his amateur opinion with regards to the production of whiskey, was the fact that the company was hiding debt, as indicated in the Chinese SAT docs. Also, remember, at the end of his article, he disclosed “no position” and further affirmed his position of NOT BEING short, inside of the SA comments section.
None of this means BORN is legit and the stock is off to the races, mind you, despite my long position. All I am saying is, these guys are full of shit and should be taken to task over it.
If I might be so bold, here is a series of screen shots, chronicling this egregious story, with all of its grotesque beguiling.
Mr. Little’s disclosure: “no position”
Mr. Little reaffirming “no position”
Conjecture, regarding SAT/SAIC docs. You can hear about them, but you cannot see them, for they belong to the “Geo Guys.” Also, he throws in some more conjecture about one of his “experts” who talked to BORN’s plant managers, which further proves his thesis, with regards to the production of whiskey. It’s laughable, really.
Fast forward, post BORN‘s stock decline of 23%, to today. Mr. Little covered his short in the $10-12 range, despite his earlier disclosures of “no position.” Furthermore, he is no longer interested in “fighting with management.” He has moved on, sort of.
Oh, by the way, the SAT and SAIC docs DO MATCH the SEC docs. But, it must be fake, since China is all full of liars and thieves, no?
The “Geo Guys” confirm they now match. “lol”
On one hand, there are intelligent short sellers, like Chanos, Hendry and Einhorn etc. On the other, you have “Geo Guy’s” with a little help from the Little’s, delivered by the hapless fuckers at Seeking Alpha. What these people are doing is feeding off American distrust of all things Chinese. Ask any American about Chinese stocks or products and they ridicule them. It’s easy to allege fraud, but hard to prove. I would be hard pressed to believe they did not trade ahead of this report, thereby profiting from a false facts (hello SEC). What must stop is the conjecture. I cannot stand stock promoters and I absolutely loathe people who raid stocks, with the help of false reports. Like I said before, I am not a cheerleader for the company. I own shares and feel they go higher, especially into earnings (2/15). But, at the very minimum, I think Mr. Little owes his readers and apology an should post a correction, now that new “facts” have arisen, vindicating the company of hiding massive amounts of egregious, insurmountable debt.