8 China OTC Companies Play CFO Musical Chairs

Just Monday, we learned that not one but two C.O.P. Index companies appointed a new CFO to their management. In fact, this has been a very notable trend of late, and I decided to dig a little more. The result is quite shocking - at least 8 (yes, 8!) index companies (i.e. more than 15%) had a CFO change in the last 2 months or so. The following is a timeline:

10/8 - China 3C Group (CHCG.OB) appointed a new CFO in the fallout over their failed stock offering in September.

10/29 - Mystaru.com [MYST.OB]'s CFO resigned, and a Mr. Crane has been appointed in place. It does appear though that Mr. Crane is based in Cambridge MA. So this is a case of CFO by outsourcing, which is not at all unique. But I do worry.

11/2 - China Solar & Clean Energy Solutions (CSOL.OB) appointed a new CFO, a Mr. Lam, upon restructuring and change of name from Deli Solar to China Solar.

11/7 - China Organic Agriculture (CNOA.OB) lost its CFO after he resigned upon the resignation of the old CEO. While the CEO position is still vacant, the company appointed a new CFO, Mr. Guo, who has held various finance posts.

11/13 - China Water and Drinks (CWDK.OB)'s old CFO resigned with no replacement. The company is actively interviewing. Sources tell me that this has to do with a failed PIPE deal.

11/27 - Sino Gas International Holdings (SGAS.OB) has a new CFO in the form of a Mr. Hu, who has worked at Fedex (FDX) Kinko's China. He replaced Ms. Chen who left for "personal reasons".

12/10 - China Natural Gas (CHNG.OB) announced it has a CFO, a Ms. Guo, who has worked at a Chinese subsidiary of Johnson & Johnson (JNJ). One wonders if this has anything to do with the rumors of stock price manipulation over the last 4 months, allegedly by Brean Murray. In any case, the old CFO Mr. Zhu left for "personal health reasons".

12/10 - Jingwei International (JNGW.OB) appointed new CFO Ms. Lu, who has worked with Pearson (PSO) China and Ericsson (ERIC) China. The old CFO resigned due to "personal reasons".

I think all this activity is quite remarkable. What does it mean? In many instances, it is quite clear the company in question is positioning itself for the next stage of growth and needed a more qualified individual. On the other hand, some of these movements worry me.

Did the CFO go because of disagreement over financial ethical issues? Were they pushed? What really is happening when all we get in the 8K is that the CFO resigned for "personal reasons"? I think it is almost impossible to intuit what really happened in contrast to what the company chooses to say to the outside world. And that alone gives me pause.

My Position: Long CHCG.OB