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Matt Berry
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Follow me on Twitter: https://twitter.com/MattBerry01 I'll be publishing on my blog from now on. I usually send my reports through a newsletter first. Join the mailing list at http://www.3footcrowbar.com/ Interests: -- reading up on bounded rationality, behaviorism, and philosophy -- writing... More
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  • CHBT: R2Citron vs. Darth Nevader 5 comments
    Mar 25, 2011 5:55 PM | about stocks: CHBT
    China-biotics: CHBT


    Surprisingly the debate re-appears: longs still using investors day to refute the photos. (See yahoo thread here)  (If you are new to the debate, see photos here)
    About the Investor Day documents, we don't have them. We only have testimonies.
    I once tried to track down the testimonies for the outlet leases. I only found two, Mr. Nevader's and Mr. Wright's. Mr. Wright said that he didn't examine them. He only observed a stack of papers being brought in.
    Mr. Wright, on September 24, 2010
    "After that Travis Cai brought in the following documents for viewing: bank statements for the three largest bank accounts, tax filings and a tax confirmation letter, and a stack of lease documents for the 103 retail leases that were in force at June 30th 2010. I did not view the leases, but here is the detail on the other portions." <here>
    He gets bolder in the comments section of an SA article, December 31, 2010. Note how quickly we progress from 'I didn't view the leases … but … I saw a stack of them brought in' … to …
    "You can write all day on this subject, but I've seen the bank statements, tax filings, and leases for the now closed stores all with my own eyes." <here>
     
    And Mr. Nevader:
    "While the Company could certainly publish the list of its 103 retail locations on its website, it is a moot point since a significant number of the retail locations have been closed since 6/30/10. Therefore, the best way to do due diligence on the Company's prior retail outlets is to review the 103 leases, which were all made available at the Investor Day to anyone who wanted to review them. I looked at the leases, but I am looking forward to the Company closing all of their retail locations for the following reasons: …." <here>
    He repeats the claim in comments at SA, but again with no detail. December 31, 2010
    EG: "In addition, at the Company's Investor Day on September 20th, I saw a list of all 103 retail locations with addresses and copies of actual leases."<here>
     
    If someone has become the evidence, that person must experct to be discussed as evidence.  Investors are leaning on these testimonies. 

    There were dozens of people there, but I haven't found their statements. (Anybody know of any?) So when longs use Investor Day as proof, what they really mean is Mr. Nevader and Mr. Wright ... and these two didn't say very much.
    Dozens of attendees on a busy investor day ... I doubt that Mr. Nevader had much time to examine the leases. I also doubt that Mr. Nevader reads Chinese or can tell the difference between a CHBT lease and an altered non-CHBT lease. As for Mr. Wright's ability to judge a stack of papers by observing the weight bearing down on someone's arms ....
    For the missing outlets and the investor day "proof" ‒ Two individuals.   That's a lot of trust.
     
    Position: I am short CHBT
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Comments (5)
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  • Zachary Prensky
    , contributor
    Comments (8) | Send Message
     
    Something I don't think you or the other CHBT watchers have commented on is the lack of one-time losses on cancelling all those leases. Is it just me or is it hard to swallow that all these landlords would allow a profitable, cash-rich company to get out of 90+leases without so much as a penny paid. In any other real-estate market I know of landlords require deposits, and hold tennants to a minimum term. Companies get out of leases all the time - by paying off the landlord. If CHBT engaged in a massive lease-cutting program, Q3 & Q4 financials would show large one time payments. They didn't, as if the company didn't skip a beat.
    27 Mar 2011, 10:43 AM Reply Like
  • ursamajor5813
    , contributor
    Comments (70) | Send Message
     
    Excellent Point. There seems to be no cash paid in penalty for breaking leases.

     

    As somebody who worked in inventory and store openings/closures as a kid, I know that closing scores of stores is a time consuming process, and not free either. I also find it hard to believe that after closing 40+ stores, they have a similar number of employees.

     

    What happened to all the shelving, product, cash registers, banners, etc. and how much did they get for it when they sold it off?
    31 Mar 2011, 12:09 PM Reply Like
  • Matt Berry
    , contributor
    Comments (220) | Send Message
     
    Author’s reply » I had a faint memory of an exchange that took place on the 2nd Q CC. I finally took the time to re-listen to it. It deals with the costs of closing the 95 outlets. Leases, severance ... etc.

     

    The intro was difficult for me to catch, but I believe the question was by Mark Hake, of Hake Investment Research:

     

    2q CC for CHBT: www.chn-biotics.com/c4.../
    The question begins at around 01:23:25 (about 4 minutes long)

     

    Worth listening to.

     

    Excerpts from Mark’s dialogue:
    "[heavy exhale] I'm gonna have to go through that because I didn't understand what you're saying ... "

     

    I had some difficulty with the pronunciation, but I believe that management's response, in a nutshell, was that expenses saved by the closures “offset” the costs of the closures.

     

    Mark: "Well, when you closed the stores, what did you do with the people? What about the leases? Don't you have to pay the rest of the lease that you signed? So that's a higher expense not a lower expense. “

     

    Mark ended that segment with "I wish that would work this way here in the United States."
    10 Apr 2011, 04:37 PM Reply Like
  • YngvaiMalmsteve
    , contributor
    Comments (171) | Send Message
     
    Absolutely amazing that this stock is still trading. The fraud is so blatantly obvious and in-your-face...the evidence of fraud is much stronger than CCME and others which have been halted. CHBT management must be laughing at their ability to pull the wool over the eyes of U.S. investors
    29 Mar 2011, 04:07 PM Reply Like
  • ursamajor5813
    , contributor
    Comments (70) | Send Message
     
    I like their second non-informative press release that refuses to identify both the customer - even by the state or city in which it is based - or the amount contracted for.

     

    Reeks of pumping to me.

     

    Wouldn't be surprised if they announce a token buyback or an insider makes a big deal over buying a few thousand shares soon.
    31 Mar 2011, 12:11 PM Reply Like
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