By Gary Cassady
CNinsure (CISG) is up over 30% from Friday's close after the company reported an offer to go private at $19 per share. However, the market is betting that this going-private deal still remains somewhat uncertain. From its current price of $16.80, there remains over $2 of premium on shares of the company to its buyout price (equating to a premium of over 12%).
Uncertainty exists in any buyout scenario, but CISG is a unique case. Analyst research firm OLP Global has raised some questions on the company's practices in the past. The chief analyst at the firm is a native Chinese, Adele Mao.
A small research firm focused on Chinese corporate research, OLP Global's Adele Mao questioned CISG back in December, citing odd practices in CISG's sales incentive program. That report coincided a sudden drop in the company's shares.
In March, JP Morgan downgraded CISG CISG from Neutral to Underweight in a note to investors. Earlier that month, Oppenheimer had cut their price target on the stock, as had analysts at Brean Murray.
Perhaps most interesting is that JP Morgan's choice to downgrade CISG came after the company announced an $80 million sale of one of its major divisions—Datong. Yes, that sale is certainly proof that CISG has some value, but this series of events concerning CISG seems somewhat familiar.
Last year The Financial Investigator raised questions of fraud on Chinese company Harbin Electric (HRBN) after its founder and CEO Tianfu Yang attempted a $24 per share buyout. As of yet, investors in Harbin Electric are still waiting to receive that $24 deal.
Light rumors have circulated today that CISG could follow HRBN in the recent, accelerating trend of fraud accusations regarding Chinese companies.
Disclaimer: Benzinga has no financial position in or financial interest in the performance of CISG or HRBN whatsoever. This article may include mentions of rumors, chatter, or unconfirmed information. Readers should beware that while unconfirmed information may be correlated with increased volatility in securities, price movements based on unofficial information may change quickly based on increased speculation, clarification, or release of official news.