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Chris Ridder
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MSc Inventment Managment 2005 Cass Business School City University of London I started trading when I was 20 years old by shorting orange juice futures! And yes the results were not pretty.... Here is my public performance at Marketocracy which the long fund started November of 2000:... More
  • Final Score: Muddy Watters 1 Sino-Forest 0 0 comments
    Aug 26, 2011 2:23 PM | about stocks: SNOFF
    This report was just posted on the blog Zerohedge:

    It quotes the Ontario Securities Commission as follows:
    "Sino-Forest, through its subsidiaries, appears to have engaged in significant non-arm’s length transactions which may have been contrary to Ontario securities laws and the public interest;

    Sino-Forest and certain of its officers and directors appear to have misrepresented some of its revenue and/or exaggerated some of its timber holdings by providing information to the public in documents required to be filed or furnished under Ontario securities laws which may have been false or misleading in a material respect contrary to section 122 or 126.2 of the Act and contrary to the public interest;

    Sino-Forest and certain of its officers and directors including Chan appear to be engaging or participating in acts, practices or a course of conduct related to its securities which it and/or they know or reasonably ought to know perpetuate a fraud on any person or company contrary to section 126.1 of the Act and contrary to the public interest;"

    A Reuters report states, "The OSC ordered all trading in Sino-Forest securities to cease and ordered several executives to resign, though it rescinded that order." Trading is still suspended and the stock closed yesterday at 4.81 on the Toronto exchange. So the rescind order must only apply to the executives. Still it is disturbing that such an order was made in the first place.

    I had these following lessons to learn for a trader/investor from this situation in a post I wrote in  June:
    1. Mistakes and errors happen even to the very successful            (John Paulson owned the company)
    2. Getting out at $3 is better than Zero; or cut the losses of a bad trade/investment the best you can                                          (Paulson got out)
    3. Muddy Waters had a thesis that "... Harvard-educated Chinese analysts based in New York usually have little more in common with Chinese company managers than you do. As a result, many sub-par Chinese companies find ways to game the system and trade at inflated values." that appears to have (change that to has)  beaten Wall Street "Due Diligence"; so don't abandon sound thinking in front of entrenched and powerful "conventional wisdom".
    There are some links at the bottom of the zero hedge post that shows large investors still buying into the stock even after the original report was released. Goes to show, that being large and having money does not always equate to being right.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Themes: short ideas Stocks: SNOFF
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