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  • Orient Paper Inc: A misunderstood company [View instapost]
    This author posts conclusory statements without providing a shred of facts, evidence or sound reasoning therefrom. The author further goes on to make statements that appear blatantly false.
    The author states that all of Muddywaters allegations were disproved in details but he provides nothing at all in support of that – no facts, evidence or reasoning. He just states the allegations are disproved and we are supposed to believe it without his providing any support for that point. The author calls on to falsely claim that ONP Management have released reams of documents and data – they have released a paucity of documents and data.
    The author accuses other short sellers of distort and talking down the stock for their own personal gains – but provides no facts, evidence or reasoning to support that claim. Indeed, he does not even say what alleged distorting was done. We are just supposed to except his conclusions.
    The author makes the blatantly false representations that analysts agree with ONP’s management that ONP’s numbers are accurate. I have not seen anywhere that the analysts have made such representations. Analysts do not conduct audits and accept the numbers as reported by the company. Of course, the author did not specifically identify the analysts that he was referring to and where he claims they made such representations. So that you can independently verify that I am correct, I will provide you with the analysts and their websites: (1) Roth Capital was one such analyst, website at Roth Capital have already withdrawn their report and stated they need to do further due diligence; (2) Julie Chen at Hudson Securities, website www.hudsonsecurities.c...; and (3) Brian Connell at Harbinger Research, website www.harbingerresearch..... The author is not telling you the truth – these analysts will not tell you that they can confirm that ONP’s revenue and margins are correct and accurate. They will tell you they just got the numbers from ONP. Don’t believe me or the author, just contact them and see. Get a statement from them in writing and prove me wrong. Good luck.
    I have not seen anywhere statements by any of the institutional investors will tell you that they can confirm that ONP’s revenues and margins are correct and accurate. You can find a list of 17 of the institutional investors through the wall street journal online and probably through other websites like MSN. Like the rest of us, they just got the numbers from ONP, their SEC filings. Don’t believe me or the author, pick a few at random and contact them and see. Get a statement from them in writing and prove me wrong. Again, good luck.
    The Board of Directors has not confirmed that ONP’s revenues and margins are correct and accurate. Instead, one of the first actions of the newly appointed directors, Drew Pearson and Mr. and Mrs. Wang, who are also the sole members of the recently formed audit committee, was to decide that it is necessary to investigate fraud allegations against the management by hiring a law firm to investigate and an accounting firm to do an audit. Drew Pearson is an accountant that is the head of the audit committee. Don’t believe me or the author, contact Drew Pearson and ask him if he will make a statement that he can definitely confirm that ONP’s revenues and margins are correct and accurate. Drew Pearson can be contacted through the website of his accounting firm at Get a written statement by him and prove me wrong. Once again, good luck.
    The fact that there has been no reported sales of stock by Chairman and CEO Zhenyong Liu is simply a red herring. Look at other examples. NEP’s CEO and Chairman didn’t report selling any shares of stock and the company fired him and his mother, reported that money from the bank accounts was going directly to him, reported that all the financial reports need to be restated, and is currently suspended from trading for not being late on filing its 10-Q and is on its second extension of time. I can make paint plenty of reasonable scenarios under which a CEO would know a company was a fraud and not sell stock, but so can you I imagine, so why speculate. The point is that there almost always are at least a period of time where a CEO knows a company is a fraud and doesn’t report selling his stock, so this is simply a red hearing.
    The problem with this instablog is that its point is to assert that ONP is not a fraud but it just fails to provide a single bit of evidence, facts or reasoning by which one could come to that conclusion. Contrast that with the muddy waters report at They provide you plenty of facts, evidence and reasoning and information by which you can go about independently verifying the information. Look at my instablogs, where I show the problems and inconsistencies with ONP through cites to ONP”s own representations in its SEC filings, on its websites and in the videos of ONP by the promoters of its stock.
    The hallmark of almost all frauds involves a claim that you should just believe reputable people. I suggest that you not accept what I say or what this author says but look at the evidence yourself and make your own decision. I don’t believe it will take long to get a sense that there appears to be some very serious problems with ONP’s representations, as well as the representations of this author.
    Disclosure: Short ONP
    Jul 28 11:46 PM | Likes Like |Link to Comment
  • Orient Paper: Not All BDOs Are the Same [View article]
    you make these posts pumping the stocks but without providing any facts, evidence, or sound reasoning therefrom. I have posted instablogs showing the problems and inconsistencies with ONP based on their own representations in their SEC filings, their websites and by their CEO; and based on the videos by the two promoters, Rick Pearson and Doug from
    the company is vulnerable because of the problems with it, not because you claim that people short the stock are "psycho" without any facts, evidence or reasoning.
    Jul 28 04:00 PM | 1 Like Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    I am short the stock. But when one of the first actions of a newly formed audit committee, formed with new directors required by recent investors in a large capital, is to find it necessary to decide to hire a law firm and an accounting firm to determine whether management has been embezzling and comitting fraud, I do not find that a good fact. Can you recite me any time in history this has resulted in good news for the company?
    In the meantime, I would like an announcement that they have hired a law firm and what their name is (they say they decided to hire Loeb & Loeb, but Drew Bernstein said previously said they were hiring DLPiper and that didn't happen.) I would also like an announcement that they actually hired a big 4 accounting firm and their name.
    Additionally, is this an admission that the audit by their current accountants is not any good? If it is good, why not release that audit report, with all the supporting detail and backup?
    Jul 28 03:54 PM | Likes Like |Link to Comment
  • Are Chinese Stocks Becoming Irrational? [View article]
    johnny inca:
    that seems to be the general pattern that i am observing.
    Jul 28 12:56 PM | 1 Like Like |Link to Comment
  • High Conviction: A Well-Managed Chinese Small Cap in High Growth Mode [View article]
    ONP may tout its r&d but its CFO admitted it has no r&d facilities and no r&d department - just had several guys learning how to make digital photo paper. ONP reported its spent about 30k on r&d in 2009; about 30k in 2008; and about 27k in 2007. So i don't think r&d is giving them any competitive advantage. To extent that ONP is conducting operations, I suspect they operate at a competitive disadvantage.
    Jul 28 11:16 AM | 2 Likes Like |Link to Comment
  • High Conviction: A Well-Managed Chinese Small Cap in High Growth Mode [View article]
    I was long ONP, woke up one day and saw the Muddy Waters report which immediately made me realize that they had done the due diligence that I should have and that my due diligence was poor. The clincher for me was the Rick Pearson Video on Youtube of his visit to ONP (Muddy Waters was on the same visit). Instead of the cutting edge, advanced technology paper mill that represented, the video shows old dilapidated, rundown equipment. Can verify it, but my own impression was that they had just staged the operations for the day.
    I sold out my position the same day as the MW report and seeing the Pearson video. After re-reading all the SEC filings and ONP's website, I found many problems and inconsistencies with ONP's own representations. I then shorted ONP.
    I believe that, at best, they have a very small manufacturing operations and/or resell paper. My own personal opinion, which I can't verify for sure, is that they aren't manufacturing any paper at all. My view on this is due to viewing the videos by Pearson and doug at It appears to me that steps in the production process are completely missing and that was is being done there is staged for the day.
    I am not impressed with Eric Jackson's due diligence. In response to the MW allegations of embezzlement, Eric Jackson's response was that he checked with management and they verbally confirmed that all the money was in the bank account. My experience is that most theives deny they are stealing so I would like to do a little more than just ask them and get a denial before I conclude they are innnocent. Eric Jackson appears to have a contrary view and that causes me not to view highly his opinion, at least on this issue.
    Jul 28 11:12 AM | 4 Likes Like |Link to Comment
  • Video of visit to ONP [View instapost]
    what to you think of Doug of putting out that video of his visit to ONP and then selling his shares of ONP stock?
    Jul 27 11:30 AM | Likes Like |Link to Comment
  • High Conviction: A Well-Managed Chinese Small Cap in High Growth Mode [View article]
    do you have any actual facts or evidence to back up your conclusory claims or are you just making it up?
    Jul 27 10:03 AM | Likes Like |Link to Comment
  • Video of visit to ONP [View instapost]
    Evidently the author of the video, Doug, has been selling his ONP shares.
    Jul 27 01:39 AM | Likes Like |Link to Comment
  • Another Bad Video for Orient Paper Inc. (ONP) by a Promoter of the Company? [View instapost]
    Does Doug, the maker of the video, agree with me? He is now selling his stock in ONP. See HIs excuse when asked to explain the selling: "tried to be fair and sold halp so ppl didn't say pumping it. cost me money to do that. if keep all - pumping. if sell all, dumping". see
    Jul 27 12:53 AM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Unfortunately, your post appears to be just another one of attempts by many people to pump the stock without any supporting evidence or facts. Instead, you are completely conclusory.
    I posted two instablogs noting problems and inconsistencies regarding ONP, discovered by examining ONP's own representations through their own SEC filings, their own websites, and their CEO, as well as 2 videos shot by promoters of their stock.
    The approach by commentators questioning ONP such as Muddy Waters, ChineseCompanyAnalyst, and particular myself, tend to focus on facts and evidence and sound reasoning therefrom.
    Jul 26 01:01 PM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    First of all, you can see the serious problems with ONP from their own information - from their SEC filings and their websites. I detailed these problems in my own instablog. And, yes, I have read every one of their SEC filings multiple times.
    1) Why believe Muddy Waters over ONP about the top 10 customers? ONP has failed to provide any of the information about the top 10 customers which you want, even though all of that information should be in their possession. You don't even know the names of the top 10 customers from ONP, because the english names don't provide enough information to translate into Chinese. ONP does not provide the address or phone number.
    On the other hand, Muddy Waters has provided independently verifiable information because they have given you the Chinese name, the address and phone number. Thus, their information is indpendently verifiable becasue you can now investigate yourself. You can call and try to find the information. Some people at the company may tell you the information; some people may not. There are investigative techniques - you can buy a book on Amazon to learn them - that can increase the likliehood of getting that information. You can visit the company and try to find out. You can think about it and come up with questions - for example, do you pick up the paper you order (onp says they don't deliver) or is it delivered by the manufacturer.
    Could Muddy Waters have done a better or more complete report? Sure, you can say that about almost any report. But Muddy Waters is providing you substantial, important information that ONP is not and ONP is in a much better position to provide this information. Furthermore, Muddy Waters did much better due diligence than I did and did a much better report than I probably would have done - so I think they did a very good job. Their report looks much better to me than the companies response.
    2) Can we believe that companies that Muddy Waters contacted told a complete stranger the truth about their finances? Sure, it happens all the time. My last plane flight, a gentleman told me all about his company and its finances. Approached the right way, many people will talk about all kinds of things. Perhaps you have not done any investigative work and are not familiar with this. There are books on Amazon you can purchase about investigating and you will find relationship building as one of the important keys to getting people to talk to you.
    On the one hand, you cast doubt on Muddy Waters getting any info, but on the other hand, you criticize them for not getting more for customers. Well, I think you already identified the problem, not everybody was forthcoming. I don't know why Muddy Waters didn't put the name of the people they talked to - but it seems you suggest an answer - perhaps they would unsure if such disclosure would get the person undue attention at their company.
    The bottom line is that Muddy Waters identified a number of falsifications. At that point, I frankly have difficulty trusting anything ONP says.
    3) Outstanding catch regarding the customers going from over 140 in 2008 to over 100 in 2009. No matter how many times I go through SEC filings, it always seems there is still something I missed. Read my instablog - this is consistent with their reports of reducing production lines and employees. The evidence to me seems relatively clear that this company is reporting a contraction, not an expansion.
    I think you make some very valid points. In fact, if you review your points, you will se that they make a very bad case for ONP.
    Thank you very much for your contributions and the kind comment.

    Clarifications on the top 10 companies - I believe that if ONP could have provided such clarification and it would have helped them, they

    Muddy Water's disclosures about the top 10 customers are independently verifiable because they have provided you with the Chinese names and phone numbers of those customers. ONP

    I have read every single SEC filings by ONP multiple times, including the 2008 and 2009 10ks, as well as their websites. I detailed the problems in my instablog.
    You can forget about Muddy Waters and stil determine ONP is no telling the truth because ONP can't keep its own story straight - it contradicts itself. I detailed this in my own blog.
    It appears your point about Muddy Waters is that they could have done a better report and got and provided more information. Of course. This is true about any report. But I think they did a thorough job.
    You criticize them for not getting all the information for the customers then criticize them for claiming how can they have got any information because the companies would not tell them.
    My point is this, unlike ONP, Muddy Waters provided us with the Chinese name and contact number of its top ten customers in 2009. That is why it is verifiable - you can follow up and do your own due diligence. The most likely person to believe is someone who works for the customer who you contact on your own. Yes, there are times when a person calls up a company and can get information from them. Indeed, skilled investigators get all kinds of information from people that they may not be supposed to reveal.

    My point about the top 10 customers is that, unlike ONP, Muddy Waters gave you the Chinese name and the phone numbers of the top 10 customers. You can go about
    Jul 26 12:00 PM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    1) the name of the operating subsidiary. You are focused on the English translation of the Chinese name. That is irrelevant as it can be translated different ways. You want to focus on the Chinese name to see if the Chinese names are the same. It has already been established in my opinion that they are and not sure what benefit it would be to ask the company, you would want to establish by indepnednetly verifiable iinformation.
    2) Muddy Waters contacting the top ten custoemrs - you misrepresent the Muddy Waters report. Page 9 of the report provides a chart of their contacts and attempted contacts of the top ten customers and their summary. I found it quite diligent.
    Jul 26 02:26 AM | 2 Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    CSMhater: :
    I don't know if the firm who investigates, if one does, will be thorough and diligent at all. Presumption like this are the enemy of good reasoning. What and see. If they do great. If they don't oh well.
    As far as anonymity, companies, particular frauds, tend to attack short sellers. Read David Einhorn's book "You Can Fool All of the People Some of the Time". Look at all the personal attacks on the Muddy Water's guys. Look at the recent attacks on short sellers during the financial meltdown. Furthermore, in this case, all of the pertinent information is in the control and possession of ONP. If they were able to, they could have quelled this quickly and completely with thorough and verificable responses. In my opinion, they didnt. Indeed, my posts were based on ONP's own representations through its SEC filings, website, and CFO, as well as the two video's of ONP taken by its promoters.
    I am not aware of any parts of the Muddy Waters report that are incongruous. If you have commented on it, I am not aware of it and didn't agree with you.
    However, to me, since the conversation is about ONP, the only important focus is ONP. I don't care if the devil itself wrote a report or it has contradiction, if it does have accurate, verifiable evidence showing fraud by ONP, that it what is relevant in my opinion so that should be the focus.
    I am still waiting to hear if they actually went ahead and hired Loeb & Loeb or a Big 4 Accounting Firm. I am not sure why they need to hire a law firm to help them hire a Big 4 Accounting Firm. To me, this might mean that they want to try to claim the protection of attorney-client information for anything revealed. If they really want an investigation, I would hire an investigator, not a law firm. Law firms specialize in representing clients, not doing independent, neutral investigations.
    Jul 26 02:20 AM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    There is no reason to think that ONP's business is growing faster than the industries as a whole. Indeed, there are reasons to believe it is contracting as I detailed in my instablog based on ONP's own reports. There is no reason to believe that ONP is making products cheaper than competitors. Sure, these things are possible theoretically and may have happened with the companies that you mention, but there is no reason to think they are happening with ONP. Quite the oppositve.
    Why can't company change its product mix, replace its top ten customers and grow revenue by more than 50%? First of all, the company would need to either get new equipement or retool its existing production lines for the new paper, if that is possible. That takes time and money. Paper is a commodity and there are plenty of paper companies supplying paper in the area, so it would be very difficult for ONP to simply take those customers away from competitors. So it also takes time and money to get those new sales, particularly when you have not established enough of a reptuation and goodwill with your current top customers such that they are either keeping the same amount or increasing their orders. As to Walmart, I'm not sure why you mention them becaue that is certainly not what Walmart did.
    As to ONP's high inventory turnover, I can follow your argument. Small companies do not necessarily have higher turnover than larger companies. You reference the larger companies advantage as to economies of scale when you that they work on mass production because it is cheaper (note: also kind of contradicts your earlier point that ONP's paper is cheaper). You also note that ONP just manufactures the paper when someone wants it. So we are supposed to believe that ONP is increasing sales so rapidly while making customers who order paper wait till ONP then produces it and then the customers also has to send a truck to get it (ONP does not deliver the paper). It simply makes no sense.
    Jul 26 02:08 AM | Likes Like |Link to Comment