John Bird uncovers fraud at China Sky One (CSKI), shedding light onto the shady $20B Chinese...

John Bird uncovers fraud at China Sky One (CSKI), shedding light onto the shady $20B Chinese reverse merger market, as well as the also suspect community of short sellers attempting to profit off of it. "(It's) a rational position for an investor to start with, that every one of these Chinese reverse mergers is a fraud," says Bird.

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Comments (27)
  • wyostocks
    , contributor
    Comments (9119) | Send Message
    This is shocking, just shocking.
    15 Jan 2011, 09:43 AM Reply Like
  • Teutonic Knight
    , contributor
    Comments (3966) | Send Message
    Not so shocking to me though. My unsolicited advice is: Stick with the old wisdom guidance - - - Buyers beware.


    It is just that in some countries there is a cultural difference. In that fraud would be a norm, and corruption both inside and outside of the government is a cup of tea.


    Best of luck to you in your investing.
    15 Jan 2011, 10:42 AM Reply Like
  • spald_fr
    , contributor
    Comments (2814) | Send Message
    "There is no question of the benefits that opening a market of a billion people will bring to American businesses. But as I said last year, this will test China and the world trade system."
    ~ William M. Daley
    15 Jan 2011, 10:43 AM Reply Like
  • The Last Boomer
    , contributor
    Comments (1079) | Send Message
    In December Wikileaks revealed that Li Keqiang, currently Chinese vice-premier, in 2007 admitted that the GDP numbers in the province where he was a governor were "man-made and therefore unreliable". If the government in China can massage the numbers a bit, why the companies can't do the same? There is a difference though between the government adding a couple of percentage points to the growth and some of the companies in the article multiplying their revenues by 20. They have simply taken their government approach to a whole new level of redefining the word "fraud".
    15 Jan 2011, 10:48 AM Reply Like
  • RadOptimist
    , contributor
    Comments (15) | Send Message
    After reading this and reading Glen Bradford's comments in response to some of this short selling.. and some additional due diligence (which I should have done a better job).. I think it is better to be safe than sorry and get out while I have positive returns on almost all of the Chinese stocks that I have. It is throwing out the baby with the bathwater possibly, but better not to take losses. Plenty of other good opportunities out there. It shows me that a lot of Chinese stocks are just speculators dreams...This was a great article.. Thanks for the Seeking Alpha editors to putting this on the front page.
    15 Jan 2011, 11:16 AM Reply Like
  • nobby73
    , contributor
    Comments (1176) | Send Message
    My rule is that Chinese companies are great at making lots of things, but shareholder profits are not one of them. It always seemed better to invest in companies that would benefit from China's boom, rather than the directly in Chinese stocks. Sure, I may be missing out on some massive gains, but I don't live there and I lack knowledge of the situation on the ground, so I have passed.


    What I would say though, is it reminds me of the US tech markets in the late 90s, were everyone was sold on the growth story, chasing huge gains, without questioning the underlying story. I was involved in investigating the likes of Global Crossing, AOL, Worldcom, Enron and some other less famous names and saw similar outlandish growth claims. So, I would say this is more about human nature and greed than specifically a Chinese cultural thing.
    15 Jan 2011, 11:31 AM Reply Like
  • wyostocks
    , contributor
    Comments (9119) | Send Message
    You are spot on.
    I remember the 90's well. I recall when the so called "analysts" stareted valuing companies not on multiples of earnings, but multiples of sales. When that didn't justify the stock price they started to use next years sales (with rediculous rates of growth)rather than this years sales.
    Today we are in same place with Chinese stocks. Greed always brings out stupidity.
    As someone above wrote, buyer beware.
    15 Jan 2011, 11:43 AM Reply Like
  • Duude
    , contributor
    Comments (3415) | Send Message
    Its a shame really. There is so much potential for growth in the Chinese market and yet the lack of reliable and audited accounting that follows standardized accounting standards make investment no more than a throw of the dice. Its this type of shenanigans that color all Chinese companies as nothing more than scams. Clearly, they haven't yet understood the importance of attracting investor capital or they would already be coming down on this crap like they did with the baby milk contamination scandal. The Chinese government has the ability to turn around this situation if they want to. Stay tuned.
    15 Jan 2011, 12:12 PM Reply Like
  • David White
    , contributor
    Comments (5143) | Send Message
    I haven't read this article yet, but I have heard about this guy. He has been blasting CSKI under a lot of pseudonyms for a long time. He has been heavily short it for a long time, so it is in his interest to discredit the co. I have also read other articles from what should be relatively impartial sources. They raise serious doubts about Bird's credibility. I really don't know what to believe about CSKI at this point. However, I have little faith in Bird's impartiality. Eventually this will sort itself out.
    15 Jan 2011, 01:52 PM Reply Like
  • wyostocks
    , contributor
    Comments (9119) | Send Message
    Even if sceptical about Bird, ( I agree he has an axe to grind, no different than the better known shorts on Wall street) the thesis is still valid that before one invests in Chinese stocks one had better do ones homework.
    15 Jan 2011, 03:51 PM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (10311) | Send Message
    that applies to all stocks even including American. Anybody heard of the financial crisis?
    15 Jan 2011, 09:57 PM Reply Like
  • DVW
    , contributor
    Comments (156) | Send Message
    What? You mean the communists arent honest?
    15 Jan 2011, 01:58 PM Reply Like
  • dave
    , contributor
    Comments (36) | Send Message
    What you mean the Amerikins are?
    6 Jun 2011, 08:49 AM Reply Like
  • balan
    , contributor
    Comments (51) | Send Message
    If investing with the "new" China, best stick with North American companies that profit from trade with China, and keep your money out of Chinese borders.
    15 Jan 2011, 02:01 PM Reply Like
  • wyostocks
    , contributor
    Comments (9119) | Send Message
    Balan, given that mentality you'll miss a lot of opportunity in many foreign stocks. I am particularly thinking about the rest of the world, other than China.
    15 Jan 2011, 03:53 PM Reply Like
  • Michael Anderson
    , contributor
    Comments (297) | Send Message
    John Bird is the biggest fraud in the story. He bases his analysis of Chinese companies off of popcorn stands he used to run. He also uses SAIC filings which have shown to not amount to his conclusion, they arent held in high regards when comparing to SEC filings and all of the other short attacks have used his tactic as well. He has never been to China, he attacks companies, but never attempts to include himself on any of the conference calls or contact the company. He hides behind his money, arrogance, and ignorance. He is wrapped up in these beliefs, but he wont follow up on what he thinks, but just claim fraud by using analysis that doesnt work such as the SAIC filings. He uses message board forums to try and mislead investors and when he is continually proven wrong, he makes up more lies, or makes up new ways to present misleading information. He also uses $60 credit reports that use the same SAIC filings to come to his conclusions as well. Be careful of this very ignorant man.
    15 Jan 2011, 03:51 PM Reply Like
  • Michael Anderson
    , contributor
    Comments (297) | Send Message
    Also, for anyone who wants to take a further look at him and even his commentary on yahoo and Seeking Alpha, his alias is Waldo Mushman.
    15 Jan 2011, 04:08 PM Reply Like
  • Venerability
    , contributor
    Comments (3043) | Send Message
    The real fraud is lumping all these very different companies under one banner and Shorting them as a group.


    I can't prove it, since Short positions still don't have to be disclosed - a disgrace, IMO. But I believe Mr. Chanos is heavily involved in the in many cases unjustified takedown of the Hybrids as a group. And there are always Baby Short groupies who follow him wherever he goes.
    15 Jan 2011, 04:59 PM Reply Like
  • tastadr
    , contributor
    Comments (17) | Send Message
    I agree, and one doesn't need to point the finger at Chinese reverse mergers to find bad investments, and fraud. We have our fair share here. Mr Bird loses all credibility when he says, "it's a rational position to start with, that every one of these reverse mergers is a fraud." There could be nothing more irrational.
    16 Jan 2011, 08:22 AM Reply Like
  • Eighthman
    , contributor
    Comments (390) | Send Message
    No one mentions widespread fraud in an impoverished country called the US. Their entire banking system has been riddled with blatant fraud based on mortgage securities while banking officials completely escape prosecution. Worse, such unindicted criminals actually receive bonuses after doing such damage to the national economy!


    Government officials there are widely guilty of tax evasion but no one protests and their primary legislative body ("Congress") commonly passes laws WITHOUT EVEN READING THEM after lobbyists have written them!


    Please avoid investment there - you're only asking for trouble and the loss of your capital. Why the Chinese keep loaning them money, I don't know.
    15 Jan 2011, 05:49 PM Reply Like
  • Bouchart
    , contributor
    Comments (1174) | Send Message
    As I read the blurb above I thought, how is the U.S. any better?
    15 Jan 2011, 06:14 PM Reply Like
  • Ken Solonika
    , contributor
    Comments (164) | Send Message
    From the article:


    "Bird has never been to China; his closest brush came on a visit to Hong Kong in 1959. He came to shorting Chinese companies through a website run by Manuel P. Asensio. Now a financial adviser, Asensio was barred from the brokerage industry in 2006 by the National Association of Securities Dealers (now known as Financial Industry Regulatory Authority) for failing to cooperate with an investigation into misleading research reports. (The noirish world of short-selling is full of such compromised figures; Bird himself declared bankruptcy in 1985.) publishes short-selling ideas. It initiated coverage of Sky One in April 2009, questioning a history of restatements and frequent changes in auditors and sparking Bird's own investigation."


    Fraud has always existed and always will - from all sides.


    In 2003 over 300 U.S. firms had to re-state downward their past earnings. GE massaged its earnings for years and years.


    I wonder to what extent the reverse merger fraud hype is a function of big money IPO runners being cut out of the action.
    15 Jan 2011, 08:07 PM Reply Like
  • KnaveChild
    , contributor
    Comments (45) | Send Message
    Can someone tell me where the reset button is on planet Earth? We're all swimming in fraud and we need to reboot the whole frickin' system.
    16 Jan 2011, 12:49 AM Reply Like
  • Venerability
    , contributor
    Comments (3043) | Send Message
    Thanks for the Asensio information!


    16 Jan 2011, 02:35 AM Reply Like
  • tverkerk
    , contributor
    Comments (29) | Send Message
    Thanks to Mr Bird I am making money on reverse merger stocks and I can tell you that if you put money in the companies which will take advantage of the Twelft Five Year Plan, starting this year, you can make tons of money . It is a shame that Bloomberg is supporting a minority of short sell money makers by publishing this kind of short-sighted articles. Why did the writer of the article did not visit SAIC, the related companies in China and the government related departments for info..??!! to check.
    16 Jan 2011, 07:27 AM Reply Like
  • pat45
    , contributor
    Comments (470) | Send Message
    17 Jan 2011, 03:10 PM Reply Like
  • jdelfino
    , contributor
    Comments (5) | Send Message
    3 CFO's in one year should raise a few red flags.
    18 Jan 2011, 12:49 PM Reply Like
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