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Copperfield Research is the pseudonym of a research team focusing on publicly traded equities. As of the publication date of our articles, we may have long or short equity positions in the companies covered. We do not discuss unpublished reports, or provide any advanced warning of future reports... More
  • ExOne (XONE) - Who Is Tu Guihua And Mega Fame Holdings? 2 comments
    Jul 7, 2014 3:54 PM | about stocks: XONE

    Before discussing the simple question of the title above, we want to congratulate Gotham City Research on its outstanding work uncovering the Let's Gowex fraud. Kudos to Gotham City Research for its outstanding work!

    Moving on to ExOne (NASDAQ:XONE), shares have had a parabolic move since early May, climbing nearly 90% from its lows on minimal news. However, two recent filings with the SEC led us to ask the simple question - Who is Tu Guihua, Mega Fame Holdings, and Novel Century Ventures? This morning, a Form, 3 was submitted with the SEC disclosing an initial statement of beneficial ownership of 2,235,596 shares in XONE by a consortium "group" comprised of two British Virgin Island funds called Novel Century Ventures and Mega Fame Holdings, as well as an individual named Tu Guihua, that uses a Chinese address in the Guizhou Province.[1] The shares reported by the "group" would represent 15.5% of the outstanding shares based on disclosures in ExOne's most recent 10Q.[2] Surely, the magnitude of the purchases, representing a large percentage of volume during the recent parabolic move, could explain the mysterious move in XONE. Based on the Form 3 disclosures, it appears the "group" exceeded 5% requirement on 7/1/14 for 13D disclosure pursuant to Section 12 of the Securities Act of 1934. However, under the short swing profit rule of the very same act, the "group" would be subject to short swing profit restrictions given its ownership exceeds 10% of outstanding shares. The goal of the six month statutory window is to "eradicate speculative abuses."[3] (Investors may recall the Wood River Endwave securities fraud/prison sentence when discussing the importance of beneficial ownership filings[4]).

    Incredibly, just three minutes after the Form 3 was filed disclosing ownership of more than 15% (subjecting the "group" to short swing profit statutes), a Form 4 was filed with the SEC disclosing the very same "group" had begun to sell its XONE on 7/2/14, just one day after triggering its 13D disclosure requirements.[5] Why had a group that was so aggressive running the stock up, decided to start selling shares one day after it triggered disclosure requirements?

    We have been unable to find any information on the "group" shareholders, Novel Century Ventures and Mega Fame Holdings, or its principal Tu Guihua (aside from a similar filing on MakeMyTrip (NASDAQ:MMYT)).

    To be clear, we are in no way suggesting, or even implying, that ExOne management even knows who this "group" is, and we have no reason to think ExOne management has done anything wrong. However, the circumstances of a 90% stock price move, combined with a mysterious filer that subsequently begins selling shares one day after an initial disclosure - triggering the short swing profit rule stature in the process, sure creates additional intrigue for a company that has missed and/or guided down every quarter of its public existence.


    [1] http://www.sec.gov/Archives/edgar/data/1561627/000120919114046155/0001209191-14-046155-index.htm

    [2] www.sec.gov/Archives/edgar/data/1561627/...

    [3] Bershad v. McDonough, 428 F.2d 693

    [4] www.siliconbeat.com/2008/01/10/endwave-w.../

    [5] www.sec.gov/Archives/edgar/data/1561627/...

    Disclosure: The author is short XONE.

    Stocks: XONE
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Comments (2)
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  • CDM Capital
    , contributor
    Comments (448) | Send Message
     
    Something certainly smells with this 13D, sounds like an orchestrated short squeeze attempt. Too bad everyone knows this company is garbage, 2 quarters of sequentially declining revenue and still trades above 15x sales. All smoke and mirrors in our view.
    7 Jul 2014, 05:36 PM Reply Like
  • CS917047
    , contributor
    Comments (181) | Send Message
     
    CDM, this orchestrated squeeze attempt has 3 possibilities: it did take place, it doesn't take place or it will take place.

     

    If the companies are not going to be acquired or going to merge on a short notice, my best guess is that Mega Fame is going to short XONE and VJET, because both companies probably deserve it at the moment. Mega Fame can probably make a killing.
    And, they probably have all the shares they need when they need to cover... Meaning they are net long.

     

    But that's only for NOW, b/c XONE will be fine in the end!
    9 Jul 2014, 08:09 AM Reply Like
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