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Gerald Klein
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Forty year career in finance and executive management beginning on Coopers & Lybrand audit staff (CPA) culminating with twenty-six years as CEO of publicly-held companies. Prior to that and after leaving C&L served in CFO and COO capacities, all in publicly-held companies. Was an EDGAR... More
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  • The Kandi Technologies Short

    Kandi Technologies Group, Inc. (NASDAQ:KNDI) shareholders can expect the KNDI short to work overtime. There remains no alternative. On Monday, November 10, 2014, following the announcement of another strong quarter,,we witnessed a concerted short attack to spread fear, uncertainty, doubt, and despair hoping to create widespread panic.

    The same tactic was invoked today, November 12, 2014, during KNDI's meeting with investors and analysts in San Francisco. Yesterday the uptick rule was in effect and the short could not attack the bid like it's done on days when the uptick rule is not in effect, like today. The goal is to make positive developments appear negative, create FUDD (fear, uncertainty, doubt, and despair.) Oddly enough, FUDD smells like desperation.

    Every KNDI shareholder should expect these tactics to continue because 'the short' has no alternative. He cannot cover his short position. His fate was sealed June 5, 2013 when he chose to defend a short position of about 700,000 shares when KNDI broke out to a new all time high. Since then 'the short' has battled to defend that short position which now stands at almost 8 million shares. Meanwhile KNDI trades around $15 and will trade higher.

    From inception in August 2007 thru June 3, 2013, KNDI traded 169,588,474 shares over 1,451 trading days for an average daily trading volume of 116,877 shares. The float during this period was about 19 million shares.

    From June 4, 2013 thru November 11, 2014, KNDI traded 892,863,538 shares over 365 trading days for an average daily trading volume of 2,446,201 shares. The float during this period averaged about 30 million shares.

    So why did the daily average trading volume increase over 21 times since June 4, 2013 while the float increased less than forty percent?

    Todd Krajniak provides the answer in his article, "What Are They Hiding". What "they" are hiding are the days to cover. The days to cover is not 5.03 days as reported by the most recent NASDAQ short interest report. The days to cover is likely 50, 60, 70, or even 100 days. No short on earth, or in hell, wants it known the days to cover is 50, 60, 70, or 100 days.

    It's likely 95% of KNDI's daily average trading volume since June 5, 2013 is empty volume created simply to hide the REAL days to cover.

    Rest assured, the KNDI short will not go easy. He'll only go after the following events occur in combination:

    1. Breakout financial results, let's say KNDI's first $100 million revenue quarter.
    2. Forward looking information.
    3. Top-tier analyst coverage.
    4. Institutional ownership approaching 50% or more.

    All this will happen in due time, maybe sooner than we expect. In the meantime we can expect the KNDI short to grow more and more desperate to create FUDD - fear, uncertainty, doubt, and despair hoping to invoke widespread panic.

    Meanwhile, I'm enjoying the ride… I hope are too!

    Disclosure: The author is long KNDI.

    Tags: KNDI
    Nov 12 9:38 AM | Link | 2 Comments
  • Kandi Technologies Group (KNDI) - A Short Dilemma
    • KNDI short interest at all time high - 7.6 million shares
    • KNDI remains on Reg SHO Threshold List since 10/22/14
    • KNDI a Buy Recommendation courtesy of The Motley Fool Rule Breakers Investment Advisory on 10/22/14
    • Improving company, market, and regulatory fundamentals portend sharp revenue growth for the remainder of 2014 and 2015

    di·lemma (di lem'ә; also dī-) n. 1 any situation requiring a choice between unpleasant alternatives. 2 any serious problem

    "You can pay me now, or pay me later", is a slogan made famous by a FRAM oil filter commercial where an auto mechanic explains to his customer that he can either pay a small sum now to replace the oil and a filter, or a much greater sum later to replace the engine.

    It's the customer's choice.

    However, the dilemma facing the mechanic's customer pales by comparison to the dilemma facing Kandi shorts.

    CONSIDER THIS

    KNDI appeared on the SEC Reg SHO Threshold list from September 11, 2013 through September 24, 2013. KNDI's closing price at the beginning and end of that period was $5.34 and $8.34, respectively, a 56% increase. One month later KNDI closed at $7.84, up 47% from $5.34. KNDI appeared again on the SEC Reg SHO Threshold list from November 20, 2013 through November 30, 2013. KNDI's closing price at the beginning and end of that period was $6.78 and $7.17, respectively, a 6% increase. One month later KNDI closed at $11.95, up 76% from $6.78, (prices are courtesy nasdaq.com, www.nasdaq.com/symbol/kndi/historical).

    KNDI closed at $12.86 on October 22, 2014 when it appeared on the SEC Reg SHO Threshold list. At the end of November will KNDI close at $18.90, a 47% increase, or $22.63, a 76% increase?

    Either scenario is likely.

    RECENT BUY RECOMMENDATION

    I am not a subscriber of The Motley Fool Rule Breakers service but I learned through several friends who are subscribers that KNDI was a Rule Breakers Buy Recommendation last week. The Motley Fool Rule Breakers recommendations are disruptive, high technology, dynamic growth stocks.

    A key takeaway of the Rule Breakers recommendation was the opening paragraph cited to me, "We've seen Tesla Motors (NASDAQ: TSLA) launch an electric-car revolution in the U.S. by starting at the high end of the market with luxury models for affluent drivers. Now let's paint an entirely different picture: Suppose Elon Musk and team began with a play for the masses - and did so in the world's most populous nation. Kandi Technologies (NASDAQ: KNDI) is doing just that... I'm intrigued by this little disruptor."

    Other key takeaways of the KNDI Buy Recommendation shared with me were: KNDI is one of the smallest Rule Breakers recommendations with a market capitalization of about $600 million, KNDI's Zipcar-like carsharing program is intriguing, the environmental issues in China's major cities are a compelling driver for the adoption of KNDI's electric vehicles, China's government has pledged billions of dollars in electric vehicle subsidies, KNDI has accounted for the majority of electric vehicle production in China, KNDI's strategy is a smart one following bike-sharing and Zipcar-like services that have proven popular outside of China, KNDI is one of the Rule Breakers riskier recommendations as electric vehicles remain an emerging industry.

    IMPROVING FUNDAMENTALS

    On October 12, 2014 Michael Nguyen published a Seeking Alpha article, Kandi Technologies Continues To Dominate China Electric Car Market detailing KNDI's improving operating and production fundamentals, among other things, and especially highlighting KNDI's leadership position in EV production. China's EV production has increased dramatically in recent months due primarily to the EV purchase tax exemption effective September 1, 2014, the government mandated EV production goal for 2014, and seasonal factors. These factors will continue to drive increased production for the remainder of 2014.

    The macro environmental issues driving EV adoption in China remain unchanged. The China Association of Automobile Manufacturers (CAAM) told a press conference in Beijing, that China's auto market grew almost 14 percent in 2013 but is expected to experience half that growth in 2014. "China already has a huge auto market, and with more cities expected to restrict auto sales to fight pollution, it's natural for growth to slow down," said Li Xiangfeng, an analyst at Shanghai-based consultancy ISE. Whereas, EV production and sales are expected to increase.

    Looking forward, it's important to note 2015 is the final year in the current PRC five year plan mandating the adoption of 500,000 EVs by the end of 2015. Today the adoption of EVs in China falls far short of that mandate but the PRC expects to achieve its stated goal. Continuing rapid developments in EV charging infrastructure, generous national and local EV subsidies, EV licensing and parking policies, all support the likelihood EV production and adoption will surge for the remainder of 2014 and throughout 2015. With current annual capacity in excess of 300K units annually, KNDI could easily achieve production of 100K EV units or more in 2015.

    Beyond 2015, the PRC's new five year plan calls for at least 5 million EVs by 2020. To spur the achievement of that goal the PRC recently mandated that by 2016 thirty percent of all government procured vehicles must be EVs, all but assuring the PRC will reach its stated goal to have five hundred thousand EVs in use by 2015 and five million by 2020.

    SUMMARY

    I have opined on what I think KNDI is worth and I have also reported KNDI's short saga, by me and others. My Seeking Alpha contributions A Misplaced Bet, A Lonely Game, and The Wrong Road provide a prodigious history. I still maintain the reasons for KNDI s record level short position are two-fold. Initially KNDI got swept up in a basket of Chinese reverse merger stocks that were heavily shorted because they were believed to be frauds, many of which proved to be frauds but KNDI is not. Then on June 5, 2013, instead of covering a relatively modest short position when KNDI jumped from a close of $3.92 the previous day to a high of $6.95, the short chose foolishly and now faces an outsized dilemma.

    What I consistently fail to understand is why anyone would choose to short an emerging growth stock like KNDI. Let's suppose for an instant KNDI was a fraud and declined to zero. If you shorted and did not cover you would double your money, and no more. Whereas KNDI has the potential to become a ten, twenty, thirty bagger or more.

    CONCLUSION

    Courtesy of the Rules Breaker recommendation KNDI is gaining a new and wider audience. Technically, KNDI is performing very well. Fundamentally, KNDI leads China in EV production, a country mandating and providing generous subsidies for clean energy transportation solutions; KNDI is a partner in an EV carsharing program that is the most elegant intra-city personal transportation system until someday, "Beam me up, Scotty"; KNDI is a small company, it's market cap only about $600 million, early in its growth cycle and the worldwide growth cycle of EVs.

    What a dilemma… After all, when the ICEs go bankrupt what are people going to drive?

    Disclosure: The author is long KNDI.

    Oct 27 11:44 AM | Link | Comment!
  • The REAL Fraud

    Today John Jannarone published an article titled, "Worst Stocks Win Awards In Hedge Fund 'Short' Contest" following is my email to Mr. Jannarone regarding his article.

    The Kandi Short


    From: gwklein@outlook.com
    To: john.jannarone@nbcuni.com
    CC: karl.richter@tectonicinvestments.com; ir@kandigroup.com; echen@pryorcashman.com
    Subject: The Kandi Short
    Date: Fri, 10 Oct 2014 14:59:09 -0400

    Dear John:

    Just this week Mark Cuban reported to me that he believed Kandi Technologies Group, Inc. (NASDAQ:KNDI) was a fraud. I thought it very odd that he would share that opinion with me. Today reading your article, then Karl Richter's analysis, I realized why Mark Cuban shared his belief. I do not believe in coincidence.

    Kandi's short saga, and it is a saga, is well documented. The following link is the best summary, kcmria.net/Kandi-What-Are-They-Hiding.html Todd Krajinak explains well the desperation facing the short. The real trading volume in KNDI is perhaps 100,000 shares at most. The rest is empty volume generated by the short and high frequency trading. The reported short interest is about 7 million shares and is impossible to cover. Maybe infinitely impossible to cover. Karl Richter's article is the latest and most egregious attempt to collapse KNDI and enable the short to cover.

    I have authored three articles about the short position in Kandi, http://seekingalpha.com/article/2273413-short-kandi-a-misplaced-bet, http://seekingalpha.com/article/2287373-short-kandi-raised-bet-or-a-lonely-game, and http://seekingalpha.com/article/2310645-short-kandi-the-wrong-road.

    My theory remains that Mark Cuban, and others, shorted a basket of Chinese reverse merger stocks in the 2008 to 2010 time frame. Many of those stocks proved to either be frauds, or if they were not frauds, they were victimized by market forces. Kandi is not a fraud and has survived the market forces and everything the shorts have done to try to effect its demise. On June 5, 2013, instead of covering a relatively modest short position at that time, the short chose otherwise and chose foolishly. Kandi is likely to become one of the greatest short squeezes in market history despite the nefarious attempts of people like Mark Cuban, Karl Richter, et al.

    Respectfully yours,

    Jerry Klein

    Disclosure: The author is long KNDI.

    Oct 10 4:52 PM | Link | 11 Comments
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