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I look for opportunities to invest where the expected value is sufficiently greater than the cost to invest and look to invest the appropriate portion of the total funds available. To make a gambling analogy, a highly favorable investment would be one where you could invest $1 on a flip of a... More
  • Yongye International (YONG): Is Their Story Too Good To Be True? 45 comments
    Oct 20, 2010 3:11 PM | about stocks: YONG
    Introduction

         Surfing the internet, you read that the last marathon was run in 56 minutes. What do you think? For anyone who follows the marathon and achievements of human endeavor, the conclusion is obvious – the report is incorrect. If the report is not a typo, it has to be a hoax. The word record currently is over 2 hours and times simply don’t improve that fast. No one is going to run under 1 hour anytime soon. Just like no one is going to lose 100 pounds in one day. 
         A similar experience can be had reading the financial reports of Yongye, filed with the SEC. Yongye International (Yongye) reports increasing their branded stores from 200 to 18,700 in 2 and ½ years, from January 1, 2008 to June 30, 2010. Yongye claims that it didn’t sell its first product until April of 2005. Then Yongye reports going from $3.7 million in sales in 2006 to $95.8 million in 2009 to $114.3 million for just the first half of 2010. The revenue and growth primarily come from one product, fulvic acid, which they sell to farmers. The second product, fulvic acid as a nutrient for cows, has negligible sales that are dwindling. This claimed growth came while only increasing employees from 197 on January 1, 2007 to 399 on January 1, 2010.
         Oddly, Yongye refers to their branded stores while, at the same time, reporting that these stores are independently owned and operated. According to Yongye, they paint these stores owned by others in Yongye’s colors and drape the front of the stores with Yongye’s banners. Yongye claims to provide the stores with a computer to run their promotional material and receive premium staging for their products. Yongye claims that their own sales and support staff manage the relationships with the stores, overseeing 3 to 10 stores per salesperson, walk the fields with the farmers, provide training and education and after sales support to the farmers.
         What do you think? For anyone who follows business and its achievements in expansion and growth, can this story be anything other than a complete hoax, like the story of the marathon being run in 56 minutes? Let’s review some of the general problems that come to mind and then delve into specific problems with Yongye.

    The Fertilizer Business in China is highly Competitive, With Large Competitors and Skeptical Customers 

        The fertilizer industry involves a commodity product that has been studied for many, many years by large companies that have been in business and dominant for a long time.  It is a highly competitive industry.  Regarding the particular fertilizer Yongye makes, fulvic acid, Yongye reported over 164 companies in China making and selling the same product, with five of them adding the exact same nutrients Yongye does. Yongye identifies humic acid as a very similar, competing product and reports over 500 companies in China making and selling humic acid. Yongye reports it is competing with all companies that make fertilizer, of which there are thousands, if not tens of thousands in China, including very large, dominant companies.
                    The customers of Yongye’s products, Chinese farmers, are notoriously difficult to sell to, especially for any new companies claiming to sell new products. Farming has been done for thousands of years in China. The farmers believe they know best how to farm and are very resistant to any change or new products. The farmers are also notoriously thrifty and unwilling to spend money. The farmers are very cautious about changing their methods or trying new or different fertilizer, for fear of unknown effects.
                     Obtaining shelf space in agricultural stores is difficult for a newcomer to the fertilizer business. A large competitor, such as Sinofert, who sells millions of tons of product, compared to a few thousand by Yongye, has a huge advantage. In the event a newcomer could get shelf space, it is likely that any premium positioning will be given to large, well known fertilizer companies like Sinofert. While shelf space will be difficult, it would be well nigh impossible to get many store owners to allow another company to paint the outside of the store in its colors or hang its banners on the front of the store.   

    Problems with Yongye’s Story

         The Current Executives Have No Background in the Fertilizer Industry

         Despite Yongye’s primary product being fertilizer, the officers of the company have virtually no experience in the fertilizer industry. The bios of all the executive officers, including the CEO, Vice Chairman, CFO, VP of Sales and Marketing, and the VP of Corporate Strategy, do not indicate any previous experience in the fertilizer field. The only exposure to even the field of agriculture is only in the bio of the CEO, where there is a vague reference to Mr. Wu being appointed to various managerial positions of state owned conglomerates in textile, diary (diary is the spelling in the filing), and agriculture industries. There is no identification as to when he had any managerial position in any agricultural entity or what he did. The only person that claimed any background in fertilizer was the chief scientist, Professor Goa Jing, who is no longer with the company. 

    The Mysterious Creator of ShengMingsu and His Curious Disappearance

         According to the CEO, Mr. Wu, his good fortune began on the day that Professor Jing share with him the formula for Shengmingsu, which Professor Jing devoted 40 years of his life creating. The two co-founded the company together and the rest, as they say, is history. But this history was not so good for Professor Jing.
    Professor Jing apparently parted with his life’s work, without any reported compensation. Professor Jing did not receive any stock in Yongye, not a single share. Professor Jing also never received any salary for the position of Chief Scientist that he held in 2006 and 2007. By 2008, Professor Jing was replaced at Yongye as Chief Scientist without any explanation. The only detail reported of the incident was that he signed a non-compete agreement for no reported compensation. He was replaced by a Chief Scientist with a background and expertise in . . . .  animal nutrition and husbandry.
         Moreover, the story about Professor Jing and the creation of the formula appears quite doubtful. Professor Jing’s bio reveals very little experience in the fertilizer industry. Prior to co-founding the company in 2003, Professor Jing was the Deputy Director at the Petrochemical Research Institute of Inner Mongolia between 1982 and 2001. The only experience referenced in his bio regarding fertilizer is a stint as Deputy Production Director For Wumeng Fertilizer Company, but the year(s) he spent in the position are revealed. 
         In any event, as Yongye admits, fulvic acid is a commodity product produced by many companies, so it was unnecessary to tell this elaborate story about Professor Jing devoting his life to finding a special formula. Anyone can find how to extract fulvic acid from humic acid from simply searching on the internet and start producing it a short time later.

         Fulvic Acid Fraud? California Bans the Use of the Term Fulvic Acid in Product Advertisements

         Fulvic acid is one of the modern day snake oils. Do a Google search on “fulvic acid” and there is no end to the promises of this “miracle” molecule. Ingest “fulvic acid” and there is no end to the magical effects - you will have increased energy, improved concentration, increased sense of well being, faster healing time, and improved healing. Virtually any positive effect you can think of is claimed. Need a cure for cancer? Fulvic acid is the answer says some of its promoters.
         Want super growth for plants? Fulvic acid again is the answer. Go to www.super-grow.biz/fulvicacid.jsp and super-grow plant care will explain and sell it to you. Google “fulvic acid plant growth” and you will find no end to the number of companies touting and selling fulvic acid as the new “miracle grow” for plants. 
    Yongye is one of these companies making claims that fulvic acid will result in super growth, except that it sells its product solely in China. Yongye claims crops will grow so much bigger and faster with fulvic acid that customers will make 1000% return from buying their products. That’s right – 1000%.   Yongye claims that internal studies show that for every 1 rmb spent on Yongye’s products, customers will get a return of 10 rmb.   
         There is just one problem. There is no evidence that fulvic acid is a “biostimulant” that causes quicker or increased plant growth. California has banned the use of the term fulvic acid, along with its claims of being a “biostimulant”, as misleading, citing a lack of evidence supporting the claim. Yongye would be prohibited from advertising Shengminsu in California the way it claims it does in China. Oregon also has the same ban.
         How did these unsubstantiated claims for fulvic acid come about? Well, it is commonly accepted that adding organic materials to depleted soils can be very beneficial. No dispute by anyone there. The natural way is composting dead plants, which creates organic material rich in humic acid and fulvic acid. Mixing this organic material with your soil can improve its quality and structure.
         However, in order to short circuit the process, humic substances have been extracted from other substances, such as lignite coal, to be added to the soil for the same effect as composting materials. Some studies have found that humic acid does improve plant growth. However, those studies have not been repeatable. It appears that about half the studies show improvements, half don’t. The studies that appear more rigorous show no improvement. California allows humic acid advertisers to represent only that it may increase plant growth. Even if there is no stimulant effect, adding humic acid may have some benefit to improve the structure and quality of the soil. 
         Fulvic acid is the only active substance in humic acid, so it has been extracted from humic acid, advertised as having greater, more immediate effects, and sold. However, these claims are unsubstantiated.   Many important benefits of humic acid are not present when fulvic acid is extracted. Not only are the benefits of humic acid lost, but the benefits of fulvic acid which exist when still contained in humic acid are lost after it is extracted. Many of the large fertilizer companies either don’t sell fulvic acid, or, if they do, it is a very small fraction of their sales.
         It is unlikely that Yongye is getting experienced, skeptical Chinese farmers to fall for its claims regarding fulvic acid and start purchasing it for their crops. Furthermore, fulvic acid is a commodity product, with many other companies making and selling it for much longer than Yongye, so it would be very unlikely that Yongye would suddenly have extraordinary margins and growth that none of its competitors are sustaining.
     
         There is No Growth like Yongye Growth
         
         Yongye claims to have grown from 200 branded stores on January 1, 2007 to 9100 on January 1, 2010 to 18,700 on June 30, 2010. They call them their branded stores but describe them as independently owned and operated. This growth is simply not possible as described by Yongye.
         Let us just focus on the period from January 1, 2010 to June 30, 2010, during which Yongye claimed to have gone from 9100 branded stores to 18,700 branded stores, an increase of 9600 branded stores. For this six month period, this would be an increase of 52 branded stores a day.
         Assuming Yongye lived up to its earlier representations of a computer for each store, along with training, education and after sales support, what would this involve? It would require, on average, painting 52 stores a day, hanging banners on 52 stores a day, and purchasing and installing 52 computers a day. Furthermore, Yongye would need to continue to provide training, education and after sales support at the previously existing 9100 stores, as well as to a new 52 stores each and every day.
         The size of Yongye’s sales and support staff is simply not sufficient to support these functions. As of January 1, 2010, Yongye reported having 100 sales and support staff but to perform all of these functions would conservatively require about 3000 staff. Regarding adding the stores, if it took only 10 people to add a store very three days that would be over 1500 sales and support staff. Even with that number, it would be virtually impossible because you would first need to convince the new stores at an unbelievable pace, solve a logistical nightmare of getting the people and materials to each store, and do all the physical labor of painting, putting up the banners and installing the computers. 
         Meanwhile, you need a large number of sales and support staff to remain to do the training, education, and after sales support, for which you would conservatively need at least another 1500 employees.  Yongye claimed that each sales manager oversaw 3 to 10 stores at a time. Assume the number is 10 and give each manager 1 assistant; you then have 2 sales and support staff for each store. That would require 1870 sales and support staff for these functions. Of course, that number is unrealistically low. Assuming 20 working days in a month, that gives each sales and support staff only 2 days a month for each store to do training, education and after sales support.
         So, very conservatively, Yongye would need over 3000 sales and support staff to perform the functions they claim at the growth they claim. Perhaps they recruited contractors and distributors to assist. However, Yongye provides no indication in their financial reports or SEC filings that they had anywhere near that number of contractors or distributors assisting with these kinds of tasks. 

    Yongye International Claims to Be Selling More Than They Have the Capacity to Produce

         Yongye is its only manufacturer. It does not purchase the product it sells from anyone else. Yongye reported that the capacity of its production line was 10,000 tons per year for its plant product. However, Yongye reported selling more product, over 10,000 tons, in the first half of the year, than it has the capacity to produce in an entire year.
         The excess did not come from a sell of off inventory. Inventory only dropped from $42,033,261 on January 1, 2010 to $41,437,200 on June 30, 2010. This very small drop would not account for selling more than twice the amount that Yongye could make in half of one year. 
         Likewise, Yongye’s report on July 19, 2010 that it recently increased capacity from 10,000 to 15,000 tons per annum would not account for the difference. Putting aside the credibility of this claim for the moment, this increase was evidently not in place as of April 2010, since it the capacity at that time was still listed as 10,000 tons per year in an investor presentation. Thus, any increase in capacity only occurred either at the end of or shortly after June 30, 2010 and had little or no impact. Even if it had occurred earlier, the capacity would still only be 7500 tons for the year, well less than the over 10,000 tons reportedly sold.
         The announcement of the increase in capacity due to streamlined production and updated equipment was quite a surprise, casting some doubt on its credibility. Yongye had, on numerous occasions, indicated that the entire capacity was 10,000 tons per year with that equipment, without every mentioning that it could be increased or was in the process of being increased. No mention of it in the annual report for 2009, in the first quarter report, or in the investor presentations, the latest of which was in April 2010.

    Conclusion

         As the CEO, Mr. Wu, puts it when describing his previously failed business career, “dreams are beautiful, reality is harsh”. Yongye International is selling a dream to investors; the intent of this article is to explain the harsh realities. The dream is a miracle product providing returns to customers of 1000%, resulting in sales for the company that is growing at an incredible rate as a result of innovative marketing. The reality is a modern day snake oil product with little chance of anything but ordinary gains in a highly competitive industry with experienced, skeptical customers. The marketing success here is the sales pitch of Yongye to those who buy their story.   

    P.S.

    There are many problems the article didn’t discuss. Here is a brief summary of some of these problems:
         (1)    The complicated company structure making it difficult to hold anyone liable because Yongye only owns Fullmax, a virgin islands’ company, that only owns Asia Holding, a Hong Kong company, that only owns 90% of the operating entity, Yongye International, in a joint venture with Inner Mongolia Yongye;
         (2)    Yongye’s failure to have positive cash flow from operations in any year it has reported;
         (3)    Yongye’s agreement to buy the manufacturing operations from its predecessor owned in part by Yongye’s CEO, then paying $9 million in goodwill on a total purchase price of $16 million;
         (4)    the accounting firm changing every year – 4 different accounting firms in 3 years;
         (5)     A business that pays in advance and timely to its suppliers but provides terms for its customers to pay 3 to 6 months after receiving the product.

    Disclosure: Short YONG.

    Disclosure: Short YONG
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Comments (45)
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  • FoolioD
    , contributor
    Comments (14) | Send Message
     
    Nice call, genius. Please let me know if there are any other stocks you are short. I'm looking for some solid long positions.

     

    Also, you are posting on all the other comment sections articles for Yongye, and all you do is state how the authors (who are long or are making a compelling case for Yong) are making up facts they cant substantiate, and then proceed to make comments that are totally unsubstantiated. Your comments tend to fall into one of two categories: 1. A company cannot grow that fast and 2. China is shady. THOSE ARE NOT FACTS. Those are suspicions. You, obviously, have never been to China.

     

    But thanks for the short interest - I will make a nice little profit off the squeeze.

     

    Good Luck!
    15 Nov 2010, 09:55 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » FoolioD:

     

    Thanks. How is your big long position in YONG doing? LOL!
    12 Apr 2013, 02:33 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Another phony poster creating the post. Nobody has ever made a compelling case for Yongye. There are fraudsters, like yourself, who a paid pumpers of this crooked company.
    Fulvic acid fraud - California bans the use of the term in advertisements as misleading. the product is a fraud, you dopester, and chinese farmers aren't lining up to buy this newest snake oil.
    1000% return - yes, that is what the CEO claims for a farmer using it in their fields. For anyone experienced in financial matters, this is enough to know the company is a fraud. Anyone sophisticated in fraud knows that if someone comes up to you and says they can get you a 1000% return in less than a year, your best chance of saving a lot of money is to immediately turn around and walk away.
    Good luck making sense of their financial statements - they are a complete sense, internally inconsistent.
    I could go on and on with this stuff.
    The only way that anyone could believe this story is if they exercised "suspension of disbelief". The story is such utter nonsense it is ridiculously silly.
    The numerous fraudulent pumpers are typically of these pump and dump scams.
    15 Nov 2010, 10:20 PM Reply Like
  • FoolioD
    , contributor
    Comments (14) | Send Message
     
    So, case in point: You make a comment on Zack Buckley's article on Yongye:

     

    "100,000 stores by the end of the decade. You don't think that sounds absurd on its face?"

     

    You imply 100,000 sounds "aburd on its face" - meaning at face value. Why? Is 100,000 a big number? Yes it is. If you look at the CFOs comments, he states 600,000 villages, 100,000 stores by the end of the decade. So YONG is targeting 1 store for every 6 villages by the end of the decade. Is that "absurd"? I think its an ambitious target - but definitely possible with a well executed marketing strategy - which seems to be unique to YONG for the time being (unless other companies start copying it.)

     

    And if you think 600,000 villages sounds absurd - then you havent been to China - which is why I said you obviously have never been there in my previous post.

     

    Also, you refer to this claim of 1000% profit increases quite a bit, please provide a citation. Also for the California fulvic acid ban.
    16 Nov 2010, 12:47 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Jeez, are you really going to embarass youself with that 600,000 villages nonsense.
    Before you go making a nonsensical quote, do some research and work. How many people in a village? How many farmers in a village?
    If everyone in China lived in a village, that would be about 2000 people per village. But, of course, not everyone in China lives in a village. In fact, many don't. Lets say half don't, that would mean 1000 persons per village. How many stores are supported by a population of 1000, especially one that focuses on one thing, fertilizer/ Feel embarassed now. Let's start thinking before we start repeating nonsense.
    Yes, it is complete nonsense for Yongye to say they are in 20,000 stores.
    Here is what I will do for you, I will be happy to give you $25,000.00 if two conditions occur. Yes, $25,000, if you can provide me a list of the names, address, and phone numbers of these alleged 20,000 stores with a contact name in both English and Chinese within a month and I am unable to show within a month that at least 20 stores don't exist.
    You will never get that list and if you do, you will find most of the stores don't exist.
    For California's ban on fulvic acid - go to the website of California's Department of Agriculture.
    For the 1000% quote, look at the articles, it is right in their investor presentation filings. See the one from febuary 2009, where they say that for every 1 rmb, farmers will gain 10 rmb back in increased value in marketplace. That is one of the places, the CEO also said it in interviews. The guy is a nut, he said he had to pay farmers to use the product initially. Yeah, right.
    If you don't get immediately that the 100,000 store quote is ridiculous, you need to gain experience in China and everywhere else about business, about practicality, and about common sense.
    How many stores is the largest fertilizer company in the world in? A company that dwarfs YOngye (Yongye is just a pimple to them). I'll will give you a hint, it is a small fraction of 100,000.
    16 Nov 2010, 10:48 AM Reply Like
  • Nik2010
    , contributor
    Comments (2) | Send Message
     
    Holy S... is this seasaw .. crying all over places because you got burned in one or two of your "shorts" ?
    seasaw ... get a life my friend LOL
    u are making a clown of yourself and embarrassment to all .
    16 Nov 2010, 01:57 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Wow, when I post about ONP being a fraud, I am gloating because they were down 28% yesterday. When I post about YONG, I am whining and crying because they are up 7%.
    When are you guys going to realize that I am not posting about the stock price, I am posting about the company.
    The company is a complete fraud. Get a clue, dummy!
    16 Nov 2010, 10:29 AM Reply Like
  • MJ Pragmatist
    , contributor
    Comments (189) | Send Message
     
    Interesting article. There are many red and yellow flags in the article. Even if just some of them are true, I'm no longer considering YONG. I sometimes have a hard time obtaining full financial info from Chinese companies.
    16 Nov 2010, 06:02 PM Reply Like
  • legallad
    , contributor
    Comments (7) | Send Message
     
    MJ Pragmatist: Do yourself a favor that you will NEVER forget. Remember who wrote this article and how it was written. Remember the date of your post and the decision you made.

     

    Then look at the price of the company mentioned over these Xmas holidays and wonder how you could have believed what you did about a MF GG top four pick of the year.

     

    Those guys don't always pick winners, but they don't pick complete frauds either.

     

    (BEA goes by Seasaw also on other boards and sometimes discloses his Short on one while totally denying it on others)
    16 Nov 2010, 10:52 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » hi MJpragmatist:

     

    i hope you listened to legallad and followed his advice about remembering the aticle, who wrote it and the date and decision.

     

    Hi legallad:

     

    how is that big long position doing? lol!
    12 Apr 2013, 02:32 AM Reply Like
  • yuch
    , contributor
    Comments (6) | Send Message
     
    I've been doing some research on this company as well. Here's some points I have that may be able to shed some light on your worries

     

    around 50% of Chinese are farmers. that puts 700 million, 600,000 villages isn't that far of a stretch. I'd say there's even more. A regular farming village is about a couple hundred people at most - they aren't that big. my father was a farmer in china for 2-3 years during the cultural revolution

     

    chinese farmers are the most thrifty consumers you can find anywhere - you are correct about this - but they trust & love the media. Yong has an incredible relationship with CCTV-7. Their current spokesperson is a very famous chinese actor with parents that were both farmers. Having him push the product both on television and on ads across stores etc. Yong's VP of marketing is one of the top 10 marketers in all of China. The growth isn't that unbelievable.

     

    52 stores a day is incredibly doable - its not hard to convince a store - especially an independent owned store - to carry a trustworthy product and have placement with a little money incentive. I don't know if you've ever been to China, but almost every person in the city has a shop underneath their home - this is how shopping is done - they aren't the huge supermarkets, etc. Also what if Yong had a deal with a major supermarket to sell their product? this would increase their stores by a lot - i remember reading in their report about the increased expenditures in acquiring someone's customer list + marketing expenses.

     

    For the auditors - an easy explanation would be that they are changing auditors because they are serious - they want to be audited by a world renowned firm (KPMG audits it now), but maybe before they didn't have enough money? Public audits are extremely expensive and it is one of the major cruxes for small businesses. Maybe they had a less renowned auditor audit then as they grew, were able to pay for better, more renowned audits - a positive sign.

     

    I have to dig a little more on your other points, which I will. Let me know what you think about what I said, maybe you have other insight. I'll continue explain some things as I find them out. much of this was on the top of my head from the research I did about a month or two ago.
    24 Dec 2010, 09:22 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » No offense but I can't find a single thing you wrote that I agree with. For my views, read my article above. Yong claims to have over 20,000 stores. Despite many requests, I have yet to get the a ddress and phone number of a single store.
    25 Dec 2010, 11:45 AM Reply Like
  • AjarnMichael
    , contributor
    Comments (5) | Send Message
     
    I have myself seen the stores under everyone's home. Mostly they are little cafes or convenience shops. I have also seen that if one person has an idea for a successful busines, say a wedding shop, it is immediately copied by everyone else in the neighborhood until no one's business is profitable. Having agreed that it is possible to YONG to expand to 600,000 villages, I find it extremely unlikely. If it sounds to good to be true, it probably is. This type of growth is simply too good to be true. I also have huge doubts that the product sold is a "miracle" fertilizer. Although I don't have the guts to short stocks, I would have been shorting this one for close to a year now. Too much just doesn't smell right.
    5 Feb 2011, 12:06 AM Reply Like
  • yuch
    , contributor
    Comments (6) | Send Message
     
    They use distribution networks and get the revenue from these large distribution chain customers. I'm sure they each have a lot more than 300 workers working for them. This definitely explains the growth.
    5 Jan 2011, 10:54 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » No, it doesn't. You appear to be making up facts that you don't have any idea aobut. If I am wrong and you do, and have done your due diligence, please provide the names, addresses and phone numbers in English and Chinese of the distributors, as well as the specific number of people working on distributing for YONG, how much of their time they spend working distributing YONG products, their position, and what they do.
    At this point, YONG is a company claiming to have over 20,000 branded stores. I have asked repeatedly and incessantly for the locations of these stores for months - for the names, addresses ,and phone numbers in English and Chinese of all the stores. To date, no one has been able to provide the location of a single store. Why? these stores don't exist and this company is a very obvious fraud. If I am wrong, please provide the information about the stores that I request.
    .
    5 Jan 2011, 02:36 PM Reply Like
  • yuch
    , contributor
    Comments (6) | Send Message
     
    It's written right on their 10k:

     

    "
    Unique and scalable distribution model. We sell our products in China through an effective distribution model comprised of provincial distributors who purchase our products and sell them through a chain of local distributors.. Our provincial level distributors are our direct customers. We do not receive any payments from the retail stores selling our products, including the branded stores, and the stores may sell our competitors' products."

     

    The operate in Inner Mongolia - many shops in large Chinese cities are poor and hard to find a telephone # for. It's not going to be published on the web or anything - the retail stores are probably individual, small, family owned and probably don't have a phone for their business, let alone publish their phone # on the web, or however else you are trying to find a phone #
    10 Jan 2011, 12:28 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » It would be very easy to prove the stores are real, if they were, and that would be to get the addresses and go visit the stores. However, since the company is a fraud and the stores don't exist, YONG and its fraudulently perpetrators will make up one stupid story after another as to why we can't get the locations of the stores. Only product on the planet where we can't get the locations of where it is sold. There is simply no way to make such a ridiculous story sound true or credible. You just continue to make up nonsense. I suppose you think we are just supposed to have "faith' the stores exist. That was, is, and always will be the fraudsters currency they sell to victims - just trust me (and others) and please, oh please, just don't verify for yourself.
    12 Jan 2011, 11:33 AM Reply Like
  • rapsteno
    , contributor
    Comments (9) | Send Message
     
    I use to think these games existed only on the OTC or Pinksheets. Just goes to show how worthless the SEC really is. A great deal of these Chinese stocks, when viewed on FINVIZ for a quick look at their numbers have scam written all over them, unusually low OS and floats, mind-blowing ROE and EPS/PE/Sales figures, etc. My opinion, a great many of these are nothing more than fly-by-night pennystocks that don't belong on the major exchange and only got there by reverse mergers/RTOs. Burying one's head in the sand leaves your a$$ for a target. By the way, nice article.
    17 Jan 2011, 02:34 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Have you went to an investor conference where 100 or so of these chinese small cap companies trading on the us exchanges present? It is ridiculous. It looks like they all use the same charts and have the same trend, going up to the sky. Then they tell some absurd story that makes no sense and can't answer the simplest, most straightforward question.
    20 Jan 2011, 01:44 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » I was initially a fool. I saw the great numbers of some of these chinee companies and purchased them. As I examined them further, I realized they were fraudulent. I spent several months going through one after another. Sadly, I couldn't find a single one that was legitimate. It is just disgusting.
    22 Jan 2011, 05:48 PM Reply Like
  • yuch
    , contributor
    Comments (6) | Send Message
     
    I think you would benefit greatly from actually visiting the country.
    12 Jan 2011, 02:10 PM Reply Like
  • Condomsense
    , contributor
    Comments (8) | Send Message
     
    I know more about China's fertilizer industry than anybody on seekingalpha, or about China for that matter. I'm also very modest. :)

     

    Anyway, don't wanna give you too much info, but can provide the following info reg. your comments:

     

    - There are indeed more than 600,000 "villages" in China.
    - These villages are served by over 2,000 distributors of varying sizes.
    - Most of you need to rethink the concept of a "store". At the village level most of the "stores" don't even have doors or windows. They look more like a shabby garage with some bags of fertilizer on the ground and maybe an old display case with pesticide products. (Don't think all the stores look like the one's you see in Yongye's pics.) Anyway, most stores in China look like this; they are family owned stores that serve one or two villages. Nobody, and I mean nobody, knows exactly how many of these stores there are, but my guess is around 250,000 - this is only an educated guess.
    - Some villages may not have access to a local store. They can order products from China Post, or in some cases from some enterprising farmer who has taken to peddling products on a bicycle or motorcycle.
    - Some farmers don't buy at these local, village level stores but travel, sometimes for hours, to a county store, or even a provincial level store, where prices are better and they get more information.
    - The Yongye franchise stores don't only carry Yongye products. Yongye still have to compete with other companies.

     

    Got other stuff to do. May answer questions if you have any engaging ones.
    20 Jan 2011, 10:38 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Well, you definitely succeeded in your goal of not giving to much information. If there is anyone who looked at YONG that didn't know these simple elementary things, then they didn't do the most basic work. My guess would be that you don't know much about China's fertilizer industry and that there are many people who know much more about it than you, especially if you think your post was informative at all.
    21 Jan 2011, 10:30 AM Reply Like
  • Condomsense
    , contributor
    Comments (8) | Send Message
     
    "If there is anyone who looked at YONG that didn't know these simple elementary things, then they didn't do the most basic work."
    - Most investors indeed don't do "the most basic work." For example, I don't think many Yongye investors or commentators know about the plant protection purchasing habits of farmers at the village level or about ongoing changes in the Chinese agrochem distribution system. This is key to Yongye's future.

     

    "My guess would be that you don't know much about China's fertilizer industry..."
    - Your guess sucks.

     

    "...and that there are many people who know much more about it than you..."
    - There are people who know the Chinese fertilizer industry better, but they are not part of the English speaking investment community and they have no dd experience (save two or three PE investment professionals who actively invest in the sector in China.)

     

    ", especially if you think your post was informative at all."
    - Easy on the fallacies; my feelings about how informative the post was has no impact on my level of knowledge about the industry.

     

    Need more info? Don't be shy to ask. I might answer if you ease up on the personal insults and stick to the facts. ;)
    21 Jan 2011, 01:49 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » The point is that if you were really knowledgeable, and knew what was important, then you would be posting a much more informative, helpful post. I think that you may believe you know so much, but then you make your claims without any basis. For example, you claim to know more than anyone else on seekingalpha, but you haven't even found out how much each person on seekingalpha knows. So, you have a tendency to make completely unsubstantiated claims. It may be embarrassing for you, but it is true. Consequently, I have no basis to conclude that anything you say is true, or false for that matter, without researching it myself.
    21 Jan 2011, 04:03 PM Reply Like
  • Condomsense
    , contributor
    Comments (8) | Send Message
     
    "So, you have a tendency to make completely unsubstantiated claims. It may be embarrassing for you, but it is true."
    - I don't feel embarrassed. The first paragraph of my original comment is hyperbole you fool. I even added a comment that "I'm also very modest :)," so that even people with linguistic or cognitive challenges would understand that I was not stating a universal truth.

     

    "The point is that if you were really knowledgeable, and knew what was important, then you would be posting a much more informative, helpful post."
    - People with proprietary knowledge of these topics, like myself, generally do not share a significant amount information for free. I get paid by for this type of analysis by companies investing in this space.

     

    "I think that you may believe you know so much, but then you make your claims without any basis."
    - You're right. It's not important to me if you believe me or not.

     

    "Consequently, I have no basis to conclude that anything you say is true, or false for that matter, without researching it myself."
    - That's a healthy attitude which we share.

     

    I offered to help you if you had any questions, but you ignored that (key) point of my comment and instead focused, yet again, on whether or not you believe my claims. Why don't you put my knowledge to the test.
    21 Jan 2011, 07:47 PM Reply Like
  • rapsteno
    , contributor
    Comments (9) | Send Message
     
    When you need a good laugh, check out the Transfer Agent for this Ringling Brother's act, they have a whopping 3 employees located in the crotch of Las Vegas.
    22 Jan 2011, 09:21 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » I don't have any questions of you and I don't need your help. So far, you have just wasted time with a bunch of babble, so there is no reason to think it would be anything but a waste of time interacting any further with you.
    22 Jan 2011, 01:05 PM Reply Like
  • Condomsense
    , contributor
    Comments (8) | Send Message
     
    So you are not such an inquiring mind after all then...
    23 Jan 2011, 09:32 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » I like to spend my time inquiring into likely productive areas, not likely unproductive ones.
    23 Jan 2011, 10:00 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Everywhere you look with these companies you find connections to fraud. Empire Stock Transfer seems to be the transfer agent of choice for fraudulent companies. Search on Empire Stock Transfer and you will find that most the companies they are the stock transfer agents for trade for pennies or no longer exist. They are linked as the transfer agent to numerous frauds. For one example, see Turan Petroleum (OTC: ?TURP.PK), Here is one link: thestreetsweeper.org/u.... Research on the internet will provide you with others.
    23 Jan 2011, 10:33 PM Reply Like
  • rmartin929
    , contributor
    Comments (24) | Send Message
     
    You must have gotten burned bad?! I have been reading some of your research and lot of your insanity as I research a few stocks. You should get some help, try yoga, get a girlfriend, get some sunshine once in awhile. Your ongoing babbling about why your speculation and deductions are pure reality and everyone else's are just pumpers and unworthy. Anyone you seem very angry and hurt and I won't engage further because I value my time. Just a recommendation so you don't look back one day and say what hell was I doing with my precious time?

     

    *** I know you will argue every single point. So yes "You say you value your time, but yet you are posting here???" Thought I'd save you the time for your response.
    26 Feb 2011, 02:07 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Evidently, you have nothing to say to show that the company is legitimate, so you have gone on this rambling tangent. Thanks for the concern, you have an excellent imagination. When you are interested in talking about reality, let me know.
    26 Feb 2011, 08:47 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » hi martin929:

     

    how is that big long position doing? lol.
    12 Apr 2013, 02:32 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » Yong's stock price is n the $5 range, except that now trading is halted.
    12 Apr 2013, 02:34 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » One thing I find interesting is that the fraudulent pumpers of these stocks go on everywhere and gloat when the stock price is up after it has apparently been fradulently pumped and manipulated up. Even after the stock goes down a lot, they gloat when it goes up one day. If I mention I was short the stock, they go on and on if the stock price is up.
    My point about these companies is different. I am not making a point about the stock price. I am making a point about the company being a fraud.
    I am not sure why they gloat. With YONG, the stock price closed at $8.40 when this article posted. The stock price closed at $7.69 yesterday. So, despite the assertions, the stock price has not done well.
    I don't know if they stock price will go way up, stay the same, and go down in the short term. Frankly, neither does anyone else.
    However, if you come back in 5 years, I think you will find that YONG will basically be gone. These pump and dump frauds don't tend to last more than 5 years. There are exceptions, but generally their life is limited.
    So, lets judge this in 2015, unless of course, it disappears before then.
    22 Jan 2011, 05:55 PM Reply Like
  • Condomsense
    , contributor
    Comments (8) | Send Message
     
    "With YONG, the stock price closed at $8.40 when this article posted. The stock price closed at $7.69 yesterday. So, despite the assertions, the stock price has not done well."

     

    Do you think there is a strong correlation between the short term price fluctuations of YONG and the accuracy of your assertions? If you do - like your comment suggests - you need a new username.
    6 Mar 2011, 10:00 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » You seem to have missed the whole point of my post, you might want to read it again, which should make you want to retract your post. If it doesn't, may I suggest a reading comprehension course? Of course, with your user name, clearly you are not trying to make serious comments.
    6 Mar 2011, 05:13 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » its in the $5 range now and halted from trading.
    12 Apr 2013, 02:34 AM Reply Like
  • darrenjj
    , contributor
    Comment (1) | Send Message
     
    great analysis. I became aware of the company based on a Morningstar Report and what immediately made me suspicious was the following line regarding their product
    "Used in conjunction with regular soil fertilizers or animal feeds, fulvic acid is marketed to promote better cell development and improve nutrient intake for plants and increase animal immunity to diseases. These claims are verified by local regulatory authorities. At this point, the company has not conducted its own research about the scientific validity of fulvic acid, but said various studies in the United States have been conducted."
    Now thats a red flag if Ive ever seen one.
    Any thoughts on China Gerui Advanced Materials Group. This would seem like a company that is much easier to gauge.
    6 Mar 2011, 03:06 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » I haven't studied that company in detail, but I am sorry to say that it doesn't look good at a glance (re China Gerui Advanced Materials Group).
    6 Mar 2011, 05:14 PM Reply Like
  • rickrude
    , contributor
    Comment (1) | Send Message
     
    Hi mate,

     

    Great article! Keep up the good work. Your profits will be your thank you.

     

    As Chanos says, (I'm probably misquoting), you don't short to make friends. It constantly amazes me the bulls on these frauds - even after RINO etc have been exposed, they sing the same song. Lots of banter from the bulls, but no facts or research at all. The thing is, if you had discovered that it was real you would logically go long as the profits would be far greater. The constant hate on shorts is amazing - the more I see it, the less I understand.

     

    A simple comparison of this stock to any reasonable comp demonstrates the lies going on here. Pick a metric, any metric!

     

    Thanks again for the good work and the generosity in sharing your research.
    7 May 2011, 08:59 AM Reply Like
  • jonsjon1223
    , contributor
    Comments (225) | Send Message
     
    So how come Morgan Stanley invested in YONG?
    25 Jun 2011, 11:52 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Author’s reply » jonsjon1223:

     

    Implicit in your question is the assumption that Morgan Stanley has not invested in a long list of frauds. You are wrong, they have. Therefore, perhaps you should ask Morgan Stanley why they have invested in this fraud, as well as many others.
    Please be aware that it is actually a private equity firm, Morgan Stanley Private Equity Asia, that has made the investment. It may actually be clients of Morgan Stanley that have invested in the private equity firm. Goldman Sachs recently lost $1.3 billion, or 98% of the money in a Libyian government sovereign fund.
    These investment banks actually have a lousy track record of investing, in my opinion. What they are good at is obtaining fees from their clients. Some believe the trading desks at these investment banks contributed in a large way to the recent financial meltdown because of there very large losses and they should be prohibited from having trading desks.
    Note that I am actually posting against my self interest at this point. The share price of YONG is pretty low at this point, and I am not currently short. From a financial perspective, I would love YONG to be pumped again, so that I can take a short position at a higher stock price.
    25 Jun 2011, 11:38 PM Reply Like
  • liberty Capital
    , contributor
    Comments (26) | Send Message
     
    Morgan Stanley did invest in Yong, and very quickly filed a registration statement to sell their holdings.
    Whether Morgan is involved is indicative of nothing. Take a cursory glance at the institutional holders in CCME, RINO, LFT, CHBT, SNOFF- they are all there, right there till the end when the stock in question reemerges on the pinksheets.
    1 Sep 2011, 07:13 PM Reply Like
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