Kandi’s stock shot from $3.92 on June 4 to an all-time high of $8.50 on June 11, after the company announced that the Chinese government had approved the electric car it is developing with Geely Automotive Holdings Ltd. for sales and eventual subsidies.
Trading volume on the day that the release came out topped 18.7 million shares, an amount roughly equal to Kandi's public float. Since then, an additional 82 million shares have changed hands.
Sharesleuth, which previously raised questions about Kandi and the people who helped bring it public, detected a spate of unusual activity on stock message boards and social media sites at the time the company's shares were surging.
We identified a pattern of postings, on multiple sites under multiple user names, which suggested a coordinated effort to tout Kandi's shares. Among other things, a group of new posters appeared on the Kandi message board at Yahoo Finance, issuing baseless price targets for the company's stock, predicting an imminent short squeeze and even suggesting that Kandi was a buyout target.
We noted that several of the posters - "megsboats'' and "stockticklers," for instance -- were touting three other companies on the Yahoo Finance boards at the same time they were touting Kandi. Those companies were Renren Inc. (RENN), the National Bank of Greece (NBG) and Tranzbyte Corp. (OTCPK:ERBB).
We also noted that at least six Twitter accounts began posting about Kandi, with a common set of messages. Like the posters on Yahoo Finance, the people behind the Twitter accounts touted Renren, National Bank of Greece and Tranzbyte, too.
Their tweets, combined with dozens of additional ones on accounts whose links led to stock-promotion sites, made it appear that Kandi had generated more buzz in social media circles than it actually had.
At the end of that week, just after Kandi's shares hit a new high in intraday trading, something unusual happened. Nearly all of those promotional posts about the company disappeared from the Yahoo boards, along with the posters. The messages promoting Kandi on the Twitter accounts we were watching also were deleted, as were some of the tweets touting Renren, Tranzbyte and the National Bank of Greece.
Although the people behind the tout campaign tried to make the messages disappear, some of their posts were preserved elsewhere, through Google's caching system and the Nasdaq exchange's own summary of social media posts about public companies.
Here, for example, is a tweet that was deleted from an account called @canadapetro:
Here is another that was deleted from an account called @LVhotels:
Here is a third message, from an account called @GoldMining:
THE NEXT WAVE
The week of June 17, a new wave of postings appeared on the boards at Yahoo Finance, under a new set of aliases. Those posters, and the people behind the Twitter accounts, also began touting another company, Gevo Inc. (GEVO).
Gevo's shares rose almost 20 percent on June 18, on record volume, after the alternative-fuels company announced it had resumed production at an idled plant in Minnesota. They rose a further 10 percent the following day.
Toward the end of last month, the Kandi touters at Yahoo Finance and Twitter added two energy companies to the mix: Emerald Oil Inc. (EOX) and Samson Oil and Gas Ltd. (SSN). Shares of those two companies also rose.
They even posted about Kandi on the boards for many other companies that have no connection to autos or China. The second set of touters -- "chinastocksman," in particular -- did the same with Kandi, Gevo, Emerald Oil and Samson Oil.
Kandi's shares closed Wednesday at $5, giving the company a market value of $163 million. Although the price has fallen more than $3 a share from the recent peak, the stock still is up more than 30 percent since the start of June.
(Disclosure: Mark Cuban, majority owner of Sharesleuth.com LLC, does not have a position in Kandi's shares. Chris Carey, editor of Sharesleuth and the author of this report, does not invest in individual stocks and has no position in Kandi's shares).
CONNECTION TO INVESTORS HUB
Most, if not all, of the posts on the Twitter accounts that Sharesleuth was monitoring matched ones that originated on InvestorsHub.com, another site with message boards focused on the pros and cons of public companies.
The co-founder and former owner of Investors Hub, Matthew W. Brown, was charged in 2009 with participating in a multimillion-dollar "pump and dump scheme" involving several penny stock companies. He pleaded guilty to two counts of conspiracy to commit securities fraud and two counts of conspiracy to commit money laundering.
Brown was sentenced to four years in prison. The Securities and Exchange Commission also brought civil charges against him. According to documents in that case, Brown met some of the co-conspirators through Investors Hub.
The site now is owned by ADVFN Plc., a public company listed in the United Kingdom (AFN).
THE NEXT TESLA?
Some of the messages on Yahoo Finance and Twitter characterized Kandi as "the new Tesla'' or "the next Tesla." Kandi's backers have been drawing the same parallel for years, but have stepped up the comparisons as Tesla found favor with investors.
Tesla is a U.S. maker of more-advanced electric cars, which have higher top speeds than Kandi's vehicles, greater driving ranges and significantly larger price tags. Tesla's shares have tripled this year.
Some of the posts on the Yahoo Finance boards urged investors to sell shares of other companies and buy Kandi instead. Others recommended both Kandi and Renren, a social media company described in the messages as the "Facebook of China."
As we noted previously, the original set of posters also were touting Tranzbyte, whose holdings include a medical-marijuana business, and the National Bank of Greece, which has been scrambling to raise capital to avoid nationalization.
HOT-TOPIC TWITTER ACCOUNTS
Most of the Twitter accounts that promoted Kandi were named for topics that have strong investor or consumer interest -- gold and silver, Canadian oil sands, the Bakken Shale oil producing region in North Dakota, and Las Vegas hotels and real estate. Collectively, the 10 accounts we identified that posted similarly worded messages about Kandi and the other companies list more than 115,000 followers.
The Twitter posts appear to have originated with the account labeled @canadapetro. Our research found that someone using that same screen name moderates nine message boards on Investors Hub.
The profile for the person who goes by CanadaPetro on Investors Hub does not include any personal or background information. The photo accompanying the profile is of a blonde woman in a model-like pose.
CanadaPetro is listed as the moderator of the Investors Hub boards for Renren, The National Bank of Greece and Gevo - three of the companies that have been touted on Yahoo Finance and Twitter by what appear to be the same group of posters.
CanadaPetro also is the moderator of the boards for Emerald Oil and Samson Oil, two more companies that were touted by the Yahoo Finance and Twitter posters. The person behind CanadaPetro did not respond to an inquiry from Sharesleuth.
THE DELETED TWEETS
When Sharesleuth noticed that tweets were being deleted from @canadapetro's Twitter feed, we preserved them via screen captures. To see the posts about Kandi and the other companies that we saved on June 21 and June 27, click here and here.
As of Tuesday night, @canadapetro's Twitter account showed just two tweets. According to the user profile on the site, that feed is followed by nearly 15,000 other Twitter accounts.
The profile for @macauchina, which also promoted Kandi, listed just 50 tweets at the end of June, nearly all on stocks or commodities. Nevertheless, the user profile showed that the account had collected more than 12,000 followers.
On Tuesday night, @macauchina listed only 18 tweets, reflecting the deletion of the messages about KNDI, Renren and Gevo. To see the Twitter streams as they appeared on June 21 and June 27, click here and here.
The other Twitter accounts we turned up that posted a common set of messages about Kandi and the other companies were:
-- @chinasolar (all tweets have been deleted from this account)
Some of the postings about Kandi and the other companies that originated on Investors Hub also wound up on the Twitter feeds of several additional accounts that combine sports news with stock recommendations. They include @BosLoveSports, @ChiLoveSports and @LAXLoveSports. We noted that within the past week, Twitter suspended @BosLoveSports' account. The other accounts were still active as of Tuesday night.
One more Twitter account, focused solely on Kandi, popped up on June 7. Although that account, @KandiTechEVs, has not tweeted anything from the ones listed above, it did provide a link on June 10 to what it called "another writer's take on the Kandi story.''
That link led to an article that appeared June 8 on Medium.com., created by the co-founders of Twitter as a platform for distributing interesting or compelling writing.
Our analysis of the story, headlined "How China Is Set to Become the World Leader in Electronic Vehicles,'' found that it was a heavily plagiarized creation that mixed paragraphs about Kandi with passages taken verbatim -- or almost verbatim -- from a report by McKinsey & Co. and an article in the Harvard Business Review. Neither of those pieces had mentioned Kandi.
The story on Medium.com also included a quote from the founder of battery maker Boston-Power Inc., who said that China was "committed to achieving sustainable energy innovations in all aspects of society, including transportation.'' Our review found that it was lifted from a story on Scientific American's blog about Boston-Power's deal with one of Kandi's rivals in the Chinese EV market.
Much of the material about Kandi was rewritten from articles posted on SeekingAlpha.com by Arthur Porcari, an associate of the people who brought Kandi public in the United States through a reverse merger in 2007. Porcari has been Kandi's biggest online booster, and has frequently compared Kandi to Tesla.
The story on Medium.com listed the author as Pedro Delgado. In his profile on the site, he described himself as a serial entrepreneur, a disruptive investor and a start up advisor in the Boston area. We found a second profile for Delgado on another site, StockTwits.com. It identified him as a consultant for the Boston Consulting Group. That company, however, told Sharesleuth it had no listing for him in its worldwide directory.
We noted that the Medium.com story was pinned to the top of the Investors Hub message board for Kandi. It was placed there by that board's moderator.
A NEW FOCUS
On Monday, the person using the nickname CanadaPetro at Investors Hub posted more than 50 messages on the boards there, most of them about Emerald Oil, Samson Oil and a gold fund called Direxion Daily Gold Miners Bull 3X Shares (NUGT). The same thing happened on Tuesday. The Twitter account @canadapetro also tweeted about the Direxion gold fund this week, as did at least four of the other accounts we were following in connection with Kandi.
Meanwhile, the person using the name "chinastocksman" at Yahoo Finance posted messages Monday and Tuesday on its Kandi discussion board, saying he or she had sold shares of Kandi and bought shares of Samson Oil. The same person also posted a message on the Gevo discussion board, saying he or she had sold shares of that company and bought shares of Samson Oil and the Direxion gold fund. In addition, that person posted about the gold fund on the Yahoo Finance boards for nearly 20 other companies.
Kandi's stock surged Monday afternoon, ending the day with a gain of more than 4 percent. A hedge fund, Capital Ventures International, disclosed in a Securities and Exchange Commission filing that it had acquired 5.8 percent of Kandi's shares.
In addition, Jon Carnes, who helped expose several fraudulent Chinese companies under the pseudonym Alfred Little, said in a Twitter post that he had taken a long position in the stock because it was "oversold.''
Kandi's stock gave up those gains on Tuesday and Wednesday.