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  • PWC Zhong Tian: A Chinese Auditor With A Flawless Record [View article]
    PwC signed the annual reports of Chaoda Modern Agriculture and Huabao International. Both are currently halted in Hong Kong for fraud. Although it was the PwC HK office whose name appears on these reports, in fact the same mainland Chinese PwC auditors are doing the auditing work, as PwC is fully integrated in China/HK. The main difference is that a PwC HK partner is required to verify that the financial statements conform to HKFRS. (This is actually required by HKEx)

    See: http://bit.ly/JfXjCA

    PwC Singapore signed the annual reports of Sino Environment. For the same reason listed above, PwC auditors on the mainland performed the audit, and a PwC Singapore partner simply ensured that the accounts conformed to SFRS.

    PwC ZT has also directly signed their name on at least one fraud that I am aware of, and that has been delisted and the market agrees is a fraud. The stock is trading 95% off of its highs on the pink sheets.

    Basically, the premise of this article is false.
    Apr 25, 2012. 10:48 AM | 4 Likes Like |Link to Comment
  • China Medical's Debt Restructuring Should Create A Stronger Capital Structure [View article]
    Your original post omitted the most important facts which completely change the message. That's either a factual error or an intentional attempt to mislead. I'll let you choose which.

    Your subsequent posts contain some pretty absurd claims and misleading statements. I guess you'd like to ignore that fact by skipping back a few comments, but it doesn't work that way. It sure does make your comments "shorter" though, if that's what you think matters.
    Apr 22, 2012. 12:07 PM | Likes Like |Link to Comment
  • China Medical's Debt Restructuring Should Create A Stronger Capital Structure [View article]
    I commend you on reducing and recommending a reduction, but you clearly are still pushing this as a speculative long.

    You also said this on March 28:
    "if the company's financial records were accurate, there could be significant upside in shares. By holding on to a limited number of shares, shareholders still benefit on the upside and considerably hedge their risk on the downside.

    Disclosure: I am long CMEDY.PK."

    My comment correcting the factual omissions in your original post was not an attempt to start a debate, just setting the facts straight for anyone who might stumble across this article and be misled. Since you continue to claim that you are right and that I'm wrong, I certainly have the right to demonstrate exactly why I am right. If you're going to make disingenuous statements like "nor did I imply that anyone do anything with the stock", I'm going to call you out on that. Stick to facts, accurate analysis, and true statements if you don't wish to be criticized. Otherwise don't cry about it.

    Again, if you publicly state that you retract your previous recs and now recommend that longs completely exit their positions, I will gladly publicly state that you are not suffering from confirmation bias.
    Apr 22, 2012. 10:46 AM | Likes Like |Link to Comment
  • China Medical's Debt Restructuring Should Create A Stronger Capital Structure [View article]
    It's not unprofessional to point out a cognitive bias that has afflicted every investor and human being in history at some point in their life, and is clearly affecting you right now. It is, however, a bit humorous to watch someone play the victim card after they've been caught in an error. While you did not explicitly state in your original post that Zazove's position was a new one, I think the post clearly implied it. It actually doesn't matter, though-- either you factually misunderstood the situation or you omitted key facts in a misleading way to support your position -- both possibilities are examples of confirmation bias (look up the term on wikipedia if you are confused about what I mean).

    By the way, this fact vs. opinion nonsense is a complete false dichotomy. Sometimes, a person can state something without DNA-level evidence and it's still highly compelling. Such as in this case, where you have most likely convertible arbitrage funds that go long the converts and short the stock based on quant formula, it clearly does not support the notion that anyone should buy the common today after an intervening event of default. No, not fact, just common sense good judgment. And by the way the burden of proof is on you if you're claiming that these filings mean anything. The default posture should be to not draw any conclusion.

    Finally, considering that you've been promoting this stock for a while and subsequent to this comment posted an article where you were long CMEDY, I think it's disingenuous to say that you are not encouraging people to buy the stock. If you'd like to retract your long rec and now recommend that no one take any position in CMEDY, I would gladly state publicly that you are not experiencing confirmation bias.
    Apr 22, 2012. 09:34 AM | Likes Like |Link to Comment
  • China Medical's Debt Restructuring Should Create A Stronger Capital Structure [View article]
    Paul, your misreading of the filing (with respect to date and, it seems, capital structure) and your latest comment strike me as examples of confirmation bias. It's something that afflicts even the best investors, but it's important to recognize when it's happening and take a step back and admit error. A quantitative fund's purchase of the converts prior to default simply isn't meaningful to a decision to invest in the equity today.
    Apr 21, 2012. 04:38 PM | Likes Like |Link to Comment
  • China Medical's Debt Restructuring Should Create A Stronger Capital Structure [View article]
    Paul, you may want to read that filing more closely.
    1) Zazove doesn't own the common; they "beneficially own" CMED via the convertibles.
    2) Zazove is reporting its position as of December 31, 2011 -- before the official event of default.
    3) Zazove is a quantitative investor. Their algorithm probably bought the convertibles based on CMED's reported cash balance. It's very unlikely that anyone at Zazove had performed any due diligence on whether CMED is a fraud.

    If you read the Whitebox filing on the same day, you'll see that all three points above apply to them as well. It's not a coincidence.
    Apr 21, 2012. 11:08 AM | Likes Like |Link to Comment
  • China Medical Technologies: Notion Of Takeout Is Absurd [View article]
    OK, let's stipulate that's true. Then the CEO's ownership is 23.4% instead of 23.1%. Now how did you get 40%+? Since when is arithmetic a matter of opinion?
    Apr 11, 2012. 08:53 AM | Likes Like |Link to Comment
  • China Medical Technologies: Notion Of Takeout Is Absurd [View article]
    The 20-F was filed in July, and therefore includes those shares. Even if that were not true, those additional shares would take his ownership up from 23.1% all the way to .... 23.4%! I assume you can do basic arithmetic so the only conclusion can be that you are intentionally spreading misinformation. Why don't you admit to your mistakes, and leave the investment analysis to people who know what they are talking about.
    Apr 11, 2012. 08:33 AM | 1 Like Like |Link to Comment
  • China Medical Technologies: Notion Of Takeout Is Absurd [View article]
    John, this is a clever analysis and I always enjoy reading your work. But the market price of the bonds suggests pretty strongly that this is not what is happening.
    Apr 10, 2012. 06:01 PM | Likes Like |Link to Comment
  • China Medical Technologies: Notion Of Takeout Is Absurd [View article]
    9 out of 10 is a massive understatement. Kerrisdale has NEVER been wrong about a Chinese fraud on Seeking Alpha or on any public forum that I could find. You've already been wrong about CMED in the last two months.

    You posted a "short" article on 2/28 when the stock opened at $0.60 and closed at $1.70. You posted a "long" article on 4/5 when the stock was trading at around $3.85. The only thing that changed between those two dates is that the stock price went up, and AER went from 15% to 20% ownership. Really? That 5% difference made you change your mind from AER being irrelevant to AER orchestrating an illegal MBO?

    Sell low and buy high isn't a winning strategy.
    Apr 10, 2012. 05:46 PM | 4 Likes Like |Link to Comment
  • China Medical Technologies: Notion Of Takeout Is Absurd [View article]
    The 20-F says

    Xiaodong Wu(2)(4)

    74,470,001 23.1%

    Includes 71,420,001 ordinary shares and 200,000 ADSs (equivalent to underlying 2,000,000 ordinary shares) owned by Chengxuan International Ltd., which is beneficially owned by Mr. Xiaodong Wu, and 1,050,000 restricted shares granted to Mr. Xiaodong Wu which already vested.

    You'll notice that when you divide 74M by 23.1% you get 322M (or 32M ADS at a 10:1 ratio).

    I notice you had no answer about the convertible note holders declaring beneficial ownership only.

    Why don't you just admit that you have got this wrong?
    Apr 10, 2012. 05:31 PM | Likes Like |Link to Comment
  • China Medical Technologies: Notion Of Takeout Is Absurd [View article]
    This post is full of factual errors. The Chairman owns only 23% of shares as of the 20-F filing and I saw no filing disclosing an increase in ownership. I'm not sure where you got 40%+ from, but feel free to correct me if I'm wrong. Zazove and Whitebox "beneficially own" shares through their holdings of convertible bonds -- read those 13Gs a little more carefully. So those shares don't count toward the last disclosed shares outstanding, and it doesn't appear that they've "accumulated" anything. The actual ADS count may be 32M but the filings say 32M and 27M in different places.
    Apr 10, 2012. 05:15 PM | 1 Like Like |Link to Comment
  • China Medical Technologies: Notion Of Takeout Is Absurd [View article]
    I agree with Kerrisdale on this, and frankly I think he is being too kind to Gefvert. Gefvert's argument makes no sense, and following the SEC's insider trading actions last week against the firm that bought 8% of HOGS, I am pretty confident that if AER were in any way involved in a management buyout of CMEDY then the SEC would soon act against them and possibly halt the stock.

    SEC press release: http://1.usa.gov/IflhhS

    Also, since AER filed 13G (passive stake) instead of 13D (active stake), my non-expert opinion is that there would be a very good case for securities fraud against them, if AER were buying shares on behalf of management.
    Apr 10, 2012. 08:27 AM | 1 Like Like |Link to Comment
  • Evidence Suggests China Medical Is Taking Itself Private Via A 3rd Party [View article]
    You seem to be unable to avoid putting words in my mouth. I didn't say that I'm short. I didn't say that I'm not short. I have no interest in disclosing my portfolio positions and no obligation to since I have made no recommendation.

    I can tell you that I've been short a number of stocks that got pumped on SA and felt no need to comment. I just happened to think that these two articles you published today are the most irresponsible articles I've ever seen on SA (granted, I don't read it all that much). The reason I commented is I thought it was the right thing to do.

    I thought you wanted to disengage, but if you're not sure about that or if you want to make another comment calling me emotional or some sarcastic comments, go ahead. I'll unilaterally disengage here and you can have the last word if you wish.
    Apr 5, 2012. 10:33 PM | 1 Like Like |Link to Comment
  • Evidence Suggests China Medical Is Taking Itself Private Via A 3rd Party [View article]
    I didn't say that I'm short and I didn't recommend that anyone short this. What I did say is that your articles are logically unsound, that you've failed to answer the most basic criticisms of your arguments, and that it's irresponsible to make investment recommendations on the basis of what you've presented. I'll be right about that regardless of what happens to CMEDY. And to your point, yes, I will disengage here, unless a third party has a question for me (which I will try to get to but no promises, as this isn't my article).
    Apr 5, 2012. 09:55 PM | 1 Like Like |Link to Comment
COMMENTS STATS
102 Comments
216 Likes