My take on the whole situation...Felt like a rant so here goes:
To me the situation forSVM, TRE, ONP, HRBN and many of the other Chinese companies that havebeen caught in the recent 'trend' of the "short and distort" tacticseems too obvious and the more I look and reason the more obvious itbecomes. Lets take a look...Muddy Waters might have been correct on CCMEand gained some street cred along with it, but the biggestaccomplishments for the company are the take down of ONP, TRE, SPRD.Now 2 of those last 3 have successfully proven MW wrong, ONP went throughan audit (less publicized and no wrong doing was found), TRE iscurrently being investigated, and SPRD has also successfully proven MWallegations to be false.
The track record looks a little lessrosy when it is all laid out for you and then come the oddities: Afteramazing success on TRE June 2nd, SVM short interest increasedsignificantly on June 3rd, is it coincidence that the day after the mostrecent victim of the short and distort tactic (TRE) was so successfulthat short interest just happened to increase on the soon to be victimSVM, I'm not thinking so...The only difference, Muddy Waters didn't putout the SVM report it was posted on Alfred Little after an anonymousletter was forwarded to various regulatory bodies. Who is Alfred Littleand who is MW. Alfred Little is a recently created website, MuddyWaters is a recently created company, both have the same mission andboth have been fairly successful to date. The difference is that MWputs their name behind their research and has a face (whatever that isworth) and Alfred Little appears to be working under 'anonymous' orfictitious name as their is no "Alfred Little".
My best guessis this "International Financial Research & Analysis Group" that isbased out of china with the same mission "expose fraudulent Chinesecompanies while profiting off the short position" in mysuspicion consists of Alfred Little, Muddy Waters, and who else knowswhat funds/connections it has that work together to spread allegationswhich spread doubt on companies that they know (from doing business inChina themselves) will have a hard time producing evidence to refute theclaims. They specifically target overly complicated corporatestructures and companies where regulatory environment differences allowdifferent reporting etc etc (i.e. China VS Canada). Let's face it arecently incorporated company cannot just put out a report and have evena small influence on a company let alone what these guys have done!
I am ofthe opinion and have taken long positions in SVM, ONP, and TRE as to methis "short and distort" tactic is the "new" way to exploit the marketswhich are already fearful as every other day it is a new economic woe;US debt, Euro crisis you name it, somebody, many people are scared if it(as the recent recession is still fresh in everybody's mind) so why nottake advantage of peoples fear by distorting the facts on companiesdoing business in an economy that you know the majority of Canadian andAmerican investors do not 100% understand.
The real beauty ofthe whole system is now that this group of "short and distort" shortsellers have established Alfred Little and MW they need not even takeresponsibility for the allegations, the group can simply send ananonymous letter (as I speculate was done) and then come out and concurthat they had the same suspicions after the fact to avoidresponsibility...a perfect plan.
The strategy seems to obvious tome however I am sure there are many who say otherwise (hell look at theSP of any number of RTO chinese companies.) Anyways to sum it all upit seems as though people have either lost their minds or I am losingmine and only time will tell, what I can guarantee is that theregulatory environment is about the change depending on the outcome ofSVM and TRE as if they are not fraud there is some serious problem withthe system and if they are fraud again there are some serious problems withthe system.
-Import1