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DEER Goes Through The Headlights
After a two weeks ago we presented a report from Alfred Little research indicating just what a potential scam the latest alledged Chinese fraud DEER is, the stock manipulation derby that ensued to keep the price above $11 was beyond criminal. That said, we are happy to present the latest piece of evidence from Alfred Little chipping away at the facade of this latest Chinese company soon to be delisted by the Nasdaq. Look for the stock to follow every other Chinese scam on the road to oblivion. That said, be careful in buying puts: it is nearly a certainy that following a trading halt any and all puts will expire worthless even as the stock opens just shy of $0.00.
From Alfred Little Research
Another Reason to Short Deer Consumer Products
After I pointed out here the likelihood that Deer Consumer Products (NASDAQ: DEER)
management intentionally overpaid by 50% when they purchased land use
rights to 435 Mu (289,416 square meters) in Wuhu, management quickly
responded in the 10-K filed on March 10th that:
We
have received a land certificate covering 289,415.79 square meters (435
Mu or 28.9416 hectares) in the first parcel of land, on which we
anticipate building a new production facility.
Management,
however, failed to respond to the key issue of why they paid a unit
purchase price of RMB 330K per Mu vs. an average price of 240K per Mu
from the very close comparable land use rights sales in the same month,
at the same location, as I showed (here) in a list of 17 very comparable transactions.
After the urging of Global Hunter Securities analyst Joe Giamichael, DEER management followed up by filing an 8-K (here) including a picture of the purported land use right certificate to the 435 Mu parcel: (Click to enlarge)
The 8-K included a translation of the certificate (here) and includes the certificate number “019711318 S” (shown above). Management
certainly hoped that this incredibly realistic looking land use right
certificate would convince Joe Giamichael and other analysts that the
435 Mu land use rights purchase was legitimate.
Giamichael followed up stating, “We are comfortable that the company has paid what they had claimed to have paid to the Land Bureau”. Giamichael did not provide any assurances whether the high price DEER paid made sense. In
fact, analysts and investors should demand an immediate explanation
from DEER management of why they overpaid by at least $12 million, in
total, for the two parcels (660 Mu).
To find the
truth, my legal team and I returned to Wuhu this week to check the
authenticity of DEER’s land use rights certificate with the Wuhu
Municipal Bureau of Land & Resources (the “Municipal Bureau”), the only government authority allowed to issue this certificate. DEER’s certificate is clearly stamped with the “seal” of the Municipal Bureau. Here is a picture of the government complex housing the Municipal Bureau.
The
Municipal Bureau has many departments, three of which Bureau staff
recommended I visit to present the certificate for authentication. The three departments I visited were:
1. Wuhu Municipal Bureau of Land & Resources Enforcement and Inspection Department - which tracks and monitors the legality of all land transactions.
2. Wuhu Municipal Bureau of Land & Resources Land Registry Management Department - which administers
land use rights certificate issuance and authentication, land survey,
registration, land usage status and record changes
3. Wuhu Municipal Bureau of Land & Resources Land Administrative Department - which coordinates the activities of all other departments within the Municipal Bureau.
The signs designating the offices of two of the above Municipal Bureau departments are shown below:
I recorded all conversations with the Municipal Bureau staff during both of my visits. The following is a summary of my findings:
-
Incredibly,
none of the Municipal Bureau officials could verify the existence
of DEER’s land use rights certificate. But neither would they prove it
was a fake. Officials interviewed were either vague or
uncertain in their responses or downright protective of DEER’s
interests in this transaction. -
The Record
Office under the Wuhu Municipal Bureau of Land & Resources
Enforcement and Inspection Department keeps a record of all land
certificate and land transaction activities. Its attempt to verify
the certificate # 019711318 S in the computerized database
yielded no record. The staff at the Record Office clearly
explained that any registered and issued land certificate has to be
able to be located in their system, although they are hesitant to
conclude this particular certificate is a forgery. After being
questioned why the official seal of the Municipal Bureau is on
Deer’s certificate, the Record Office staff pointed me to the Land
& Resources Land Registry Management Department.
-
The
staff at the Land Registry Management Department attempted to look
up this certificate based on the number and likewise found no
record of it. The staff stated the same story as the Record Office
earlier, that any stamped and issued certificate must have a
record saved in their system. The staff specifically stated
that anything that was not in their system does not exist. They
were, however, unwilling to speculate on how the official seal of
the Municipal Bureau ended up on DEER’s certificate.
-
Not satisfied with our findings, I revisited Mr. Xu, the bureau official I mentioned in my previous report (here). Mr. Xu first thought the certificate was a legitimate copy after seeing it. However,
once he was updated with our findings in the Record Office and
Land Registry Management Department, he quickly pointed out a
record of any genuine land use rights certificate must be found at
the two departments I visited. Therefore, DEER’s certificate is very suspicious. Mr.
Xu did mention the only other possible reason for a missing record
at the Municipal Bureau was that DEER’s land transaction was
originally registered at the District level Land & Resources
Sub-Bureau of the Wuhu Economic Development Zone (the “District
Sub-Bureau”). However, Mr. Xu clarified that for DEER to
obtain the actual certificate, the District Sub-Bureau must have
submitted all documentation to the Municipal Bureau for approval. In other words, if DEER’s certificate is authentic, there must be a record of the issuance of the certificate at the Municipal Bureau. Clearly
there is not. Futhermore, Mr. Xu adamantly reiterated that DEER’s
claimed purchase price of 330K RMB per Mu is far above the 150-200k
per Mu prices he commonly sees in the Wuhu Economic Development
Zone.
Despite the clearly disturbing
signs DEER management likely concocted a fraudulent land purchase to
misappropriate at least $12 million of company funds, I decided to have
my team visit the local District Sub-Bureau in the Wuhu Economic
Development Zone to verify its findings from the Municipal Bureau. Surprisingly,
my effort to verify the certificate was immediately blocked by the
staff at the District Sub-Bureau, who claimed DEER management had
recently demanded, as a result of my investigations, that they disallow
anyone from obtaining information about DEER’s land use rights
purchases. The staff was completely unwilling to give me
any comment on the certificate and only vaguely acknowledged DEER bought
rights to two parcels of land. Unlike the somewhat
helpful administrators at the Municipal Bureau, the local Sub-Bureau
staff was completely uncooperative to my reasonable requests, with one
exception. One junior staffer interviewed mentioned the
average land price was 200,000 per Mu, again, quite similar to the price
range I obtained from three other sources - Mr. Liu at industrial
park’s investment service center, Mr. Xu at the Municipal Bureau and
most importantly the recent comparable land sales in the same zone (here).
The
following is a picture of the Investment Service Centers of the Wuhu
Economic Development Zone, which houses the District Sub-Bureau:
Conclusion:
I
question why DEER management would stop a legitimate attempt, even by a
short-seller, to verify DEER’s land use rights certificate? Is it a fraud? Given
the repeated failure to find any record at the three departments of the
Municipal Bureau, whose seal appears seemingly without authorization on
DEER’s land use right certificate, I remain convinced the certificate
is a fraud. Management continues to refuse to discuss any
of the issues raised in my previous report, nor bothered in any way to
justify paying over $12 million higher than comparable sales. Where did the money really go?
Disclosure: I am short DEER.
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Buuuuuuut, they just said they' make 1.08 per share in 2011. SEC is on it
BTW has anyone gotten DTC share deletions notices for otc stocks without transfer agents for 6 years. Borkers are deleting shares from accounts even though there is trading and a bid and ask....f'cking sec
yes, got a DTC notice on RTHMQ. not that the POS has traded but it's like, hey, that's MY fucking wallpaper. hand's off!
xacktley
Wow where the heck do you find this stuff
Global Hunter Securities, LLC
Oh deer, and all that just from a Little research.
Realtor in Georgia discloses that house she short sold for clients was later "foreclosed" upon by Bank of America. New owners had all their possessions removed from house and door locks changed.
http://www.youtube.com/watch?feature=player_embedded&v=8esGSOos2lo
I am Chumbawamba.
Nice work, Ty. These stories provide needed comic relief.
MERSChina ?
Since when do puts expire at zero? Your buying a contract to sell at a given price, if the underlying asset goes to zero, you have to ability to sell worthless shares for $x a piece. It'll most likely be moved to OTCBB before being shut down too.
Play the bond spread on this.
Walmart is not going to like the squeak coming off their shine. Buy Jardin.
tallen-
"Since when do puts expire at zero?"
Please let me know if you receive any sort of reply. I'm holding a number of puts in CAGI and CCME, both put on Nasdaq holds for how. Who makes that kind of decision anyway?
That's not the point. The key is the "last known price" used for settlement, even if in reality it is worth 0¢. In cases like this one, don't buy out-of-money puts as a lottery ticket...
Check RINO for example:
http://www.theocc.com/components/docs/market-data/infomemos/2010/nov/279...
DEER CEO bought 250,000 shares last week.
hmmmm.....
There's this $2.7 million insider purchase by the President who has a good record on insider buys and then there's some guy on a SeekingAlpha bash named Little.
Oh! BTW they just filed a 10K on March 10. The audited statement is the 10K.
George Soros on EURO
http://dawnwires.com/investment-news/george-soros-eu-needs-additional-integration-steps-to-make-euro-stable/
You deserve to make a fortune....great work....
When does Cramer make it a buy and throw a little stuffed bull?
Here's another one that can clean out your wallet:
KCAP
It's not chinese but it's made from the same kind of crap :)
Did ZH just cause a flash crash in DEER? XING still puts all these mini-scams to shame.
How could a company with property in the land of Wu-hu! be anything but a screaming buy?
CIL was down over 10% today, for a relatively short period of time. Saw some posts on a board that were all from the same person trying to push the stock down. Shorts needing to cover or scam fears, perhap both?
What good is DARPA?
http://www.zerohedge.com/darpa
The beta is interfering with potential theta, no? Or did it come out of beta and Sacrilege forgot to update the page.
Let's get on this and get it fixed. I want to see these potential trades surface in DARPA first in advance of your story release.
Thanks,
~Judge Judy
Why would puts be worthless???
If they're OOM based on last price traded, or of course, if they expire.
Auditors : Goldman Kurland & Mohidin LLP
Location: Encino, CA
Tyler,
Perhaps a quick search of other clients advised by these "auditors".
Buy the fuckin dip. BTW Deer makes an excellent rice cooker.
I like that chinese stamp with the red star in the middle. I think I'll have one made and use it on my paper money.
it is nearly a certainy that following a trading halt any and all puts will expire worthless even as the stock opens just shy of $0.00.
so the strategery is to sell naked puts