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RINO Signs Own Death Sentence, Company Likely To Be Halted Forever As Chinese IPO Craze Fizzles

Tyler Durden's picture


The plight of Chinese company RINO International is about to be over. The company has just filed an 8-K which essentially signs its own death sentence (see below). This is a stark reminder of what happens when one deals with companies going public in the US, yet subject to regulations and accounting rules of a different time and place, and we are confident that the recent onslaught of Chinese IPOs on the revenue strapped NYSE (hint: listing fees) will prove to be a complete disaster for everyone who bought into this most recent market top tick. The RINO case study will soon create a cottage industry of micro funds seeking to make massive profits by shorting then destroying the credibility of every Chinese company to have gone public on the NYSE recently. Our advice: get the hell out of dodge. We will shortly present a list of all the sell side analysts who should be summarily fired for recommending a Buy rating on this stock as recently as a month ago (yes, that include Canaccord).

From the just filed 8-K:

“In a telephone conversation on November 16, 2010, Mr. Zou Dejun, the Chief Executive Officer of the Company, informed Ms. Susan Woo of our firm, in substance, that as to the six RINO customer contracts discussed in the recent report of Muddy Waters LLC, the Company did not in fact enter into two of the six purported contracts, and a third contract among the six was explainable. When Ms. Woo inquired about the Company’s other contracts, Mr. Zou said he was not sure, but there might be problems with 20 - 40% of them. Assuming that these statements were reasonably accurate, it appears that our reports would have been affected if this information had been known to us at the date of our reports, although the effect on the financial statements is currently unknown and cannot be quantified without a thorough investigation. We further note that in a conversation the following day, November 17, 2010, involving Ms. Woo, several directors of the Company, Company counsel, and Mr. Zou, Mr. Zou stated that he was not sure the day before and went back to look into some things, and found that apart from the two problematic contracts, all other contracts are legitimate and can be verified.

The auditing standards of the Public Company Accounting Oversight Board provide procedures to be followed by an auditor to prevent continued reliance on audit reports in such circumstances. In view of the information provided by Mr. Zou Dejun, we hereby advise the Company to promptly notify any person or entity that is known to be relying upon or is likely to rely upon our audit report(s) for the periods ended December 31, 2008 and December 31, 2009 and reviewed quarterly financial statements for periods between March 31, 2008 to September 30, 2010 that they should no longer be relied upon, and that revised financial statements and revised auditor's report(s) will be issued upon completion of an investigation.”

On November 17, 2010 certain members of the Board of Directors, including Kennith Johnson, the Chairman of the Audit Committee, Jianping Qiu, the Chairman of the Board of Directors, and Mr. Zou Dejun participated in a conference call with Ms. Susan Woo, a partner of Frazer Frost, LLP in which the foregoing statements were discussed. The two other members of the Board were not available because they were traveling and therefore the Board of Directors could not take any formal action regarding the matters discussed in the Auditor’s Letter. The Registrant intends to have a telephonic meeting of the Board of Directors to further discuss such matters and related matters as soon as all of the members of the Board of Directors are available.

Update: this release has just been followed up by the following disaster:


On November 18, 2010, the Board of Directors (the "Board") of RINO International Corporation (the "Registrant") a Nevada corporation, concluded that previously issued audited financial statements of the Registrant for its fiscal years ended December 31, 2008 and 2009, which were included in the Registrant's Annual Reports on Form 10-K for the fiscal years ended December 31, 2008 and 2009, and previously issued interim unaudited financial statements which were included in the Registrant's Quarterly Reports on Form 10-Q for the periods ended March 31, 2008 to September 30, 2009 should no longer be relied on.1 The Board also concluded that previously issued interim unaudited financial statements which were included in the Registrant's Quarterly Reports on Form 10-Q for the periods March 31, 2010, June 30, 2010 and September 30, 2010 should no longer be relied on inasmuch as such financial statements incorporate results from 2008 and 2009.

The conclusion of the Board that the financial statements for the above-described periods should not be relied upon was based on statements made by the Registrant's Chief Executive Officer, Mr. Zou Dejun, after consultation with the Registrant's Chief Accountant, who reported to the Board that the Registrant did not enter into two contracts for which it reported revenue during the Registrant's 2008 and 2009 fiscal years.

Three of the Registrant's Board members, including the Chairman of its Audit Committee and Chief Executive Officer, discussed the foregoing matters with the Registrant's independent accountant on November 16 and 17, 2010.

The Registrant's Board has authorized its Audit Committee to take all steps necessary to investigate the matters set forth above and other allegations of misstatements, and address any deficiencies found, including authorization to engage an outside law firm to conduct an independent investigation with the assistance of such other professionals as it may require.

Read: game over


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Fri, 11/19/2010 - 10:22 | 740796 Sudden Debt
Sudden Debt's picture

"then destroying the credibility of every Chinese company "



Chinese companies?


This is the first time I've read those words in 1 sentence...

Fri, 11/19/2010 - 10:26 | 740812 rocker
rocker's picture

Little Ones have learned so well.  What did we teach them ???  Where are the satisfied requirements to be a IPO ???

Or is it all about the Fees.

Fri, 11/19/2010 - 10:38 | 740842 IQ 145
IQ 145's picture

 reply for the poster: But what about the solar panel companys touted by the famous Canadian pension fund advisor ? They're still okay, right ?

Fri, 11/19/2010 - 11:53 | 741124 Abiggs
Abiggs's picture

Does anybody even give a shit - please, this is like the third post on this worthless stock.

Coupled with Mike Keiser's move to CO topping the list as yesterday's story of the day, seems like there is a major lack of material to cover lately...

Fri, 11/19/2010 - 10:25 | 740807 bobert
bobert's picture

OK I give up. Whats the stock symbol for the new general motors? I type GM and GMC into Yahoo Finance and get Green Mountain Coffee Company.

Fri, 11/19/2010 - 10:28 | 740824 snowball777
snowball777's picture

It's GM. Blame Yahooohooooo.

Fri, 11/19/2010 - 10:30 | 740829 bobert
bobert's picture


I'll try again on Google.

Fri, 11/19/2010 - 10:54 | 740892 Cookie
Cookie's picture

Yahoo Finance is terrible, wrong quotes, missing charts, waste of time

Fri, 11/19/2010 - 10:32 | 740832 Jadr
Jadr's picture


Fri, 11/19/2010 - 10:39 | 740845 IQ 145
IQ 145's picture

 For some reason that made me laugh; theraputic effect on arthritis pains; thanks. maybe it really is a green mountain coffee company ? who knows.

Fri, 11/19/2010 - 10:56 | 740898 bobert
bobert's picture

Us equally smart guys think like a think.

You are welcome!

Fri, 11/19/2010 - 11:00 | 740909 bobert
bobert's picture

And now GM is dropping below $33.30.

Just in case we are surveillanced I can only ask questions due to some certain licensing constraints.

So......Is it time to short GM???

Hellofanenigneer are you awake yet?


Fri, 11/19/2010 - 11:11 | 740945 Dan_Sylveste
Dan_Sylveste's picture

Try and borrow some. Go on, try!

Fri, 11/19/2010 - 11:29 | 741026 bobert
bobert's picture

Do you have some to lend?

Fri, 11/19/2010 - 11:32 | 741040 Dan_Sylveste
Dan_Sylveste's picture


Fri, 11/19/2010 - 10:25 | 740809 goldmiddelfinger
goldmiddelfinger's picture

This from a country that supports CRM at a $10 pop to $126 on 32 cents earnings? LOL

Get real. Get GM. Buy a $40k Volt already.

Fri, 11/19/2010 - 10:41 | 740850 IQ 145
IQ 145's picture

 A "Voltswagen"; the peoples electric fantasy.

Fri, 11/19/2010 - 11:27 | 741016 nonclaim
nonclaim's picture

clever and creepy

Fri, 11/19/2010 - 10:45 | 740863 goldmiddelfinger
goldmiddelfinger's picture

CRM Plus $18 now to $134 on 32 cents. Am I to late to get in?

Fri, 11/19/2010 - 11:09 | 740926 Hansel
Hansel's picture

It wasn't $0.32 cents, it was $0.15. The adjustment was for share count difference. The share count is up because the company constantly issues new shares to CEO Marc Benioff so he can sell the stock EVERY SINGLE DAY.  This is not an exaggeration.  Look at the link.  I have been following the stock for 4+ years, and nothing has changed.  The guy makes $1,000,000 a day off a company that makes $21 million a quarter.

The forecast for next quarter is GAAP $0.06 cents. Non-GAAP is forecast at $0.27, once taking out $0.25 for stock based compensation. The stock is Marc Benioff's personal piggy bank only.

Fri, 11/19/2010 - 12:04 | 741172 Dburn
Dburn's picture

+ 1

That is fricking incredible. I went through Yahoo's listing and it looks like almost every business day in the past year he has sold 10,000 shares. He hasn't missed a day in November. 1.1 , 1.3 Million a day.


Reall Good Catch Hansel

Fri, 11/19/2010 - 12:53 | 741381 Common_Cents22
Common_Cents22's picture

I've talked to a few other traders that are puzzled on Salesforce.   What is keeping this stock up?   

Fri, 11/19/2010 - 10:26 | 740814 mynhair
mynhair's picture


Fri, 11/19/2010 - 10:26 | 740815 trav7777
trav7777's picture

an "environmental protection" company in CHINA???


Fri, 11/19/2010 - 20:14 | 742502 StychoKiller
StychoKiller's picture

Ya gotta admit, lotta "upside potential" there!

Fri, 11/19/2010 - 10:27 | 740817 Jason T
Jason T's picture

Let's NOT paint a brush across the entire Chinese Small cap.  That is like O'Reilly blaming ALL muslims for 9/11 or the Germans blaming ALL the Jews for their hyperinflation.  

Be above that and call out RINO for fraud, not the entire Chinese small cap sector. 

In China, they commit fraud, they lose their head remember. 



Fri, 11/19/2010 - 10:29 | 740825 bobert
bobert's picture

Balanced thinking can be boring.

Fri, 11/19/2010 - 10:37 | 740841 Vergeltung
Vergeltung's picture

O'Reilly said no such thing.

Fri, 11/19/2010 - 10:40 | 740846 Jason T
Fri, 11/19/2010 - 12:25 | 741268 DosZap
DosZap's picture


Screw the video, were they Muslims or not?.Truth bites.

They sure as hell were not Protestants.Or Quakers.

The bottom line is O'Reily was right, and the V sluts (sans one) were wrong.

Fri, 11/19/2010 - 10:44 | 740861 IQ 145
IQ 145's picture

 I'm willing to "paint a brush"; or connect the dots, or just use a spray can; everything I've found out about Chinese small caps is horrifying.

Fri, 11/19/2010 - 12:15 | 741223 DosZap
DosZap's picture


OT, but since you brought it up.

Pls O'Reilly is not my favorite, but the dude had a point.

9-11 murderers were Muslims, and Islamic terrorists.

He did not blame ALL Muslims, but to deny ALL that participated in 9-11 WERE, is a stupid comment.

Blame for all muslims comes from their lack of balls, to stand against these brain washed theocratic bstds.

Fri, 11/19/2010 - 10:28 | 740819 slaughterer
slaughterer's picture

The "cottage industry" of shorting/bashing China small caps you refer to is growing each week: reference Citrus, MW, Seeking Alpha Instablogs by Alfred Little, Geoinvesting, etc.  These are footsoldiers in the US trade war with China, in some regards, carrying out the smaller skirmishes while Bernanke prepares larger eco-military campaigns.

Fri, 11/19/2010 - 10:50 | 740883 IQ 145
IQ 145's picture

 If you say so; but I think this is just people who have done their homework and realized that business in China doesn't even resemble anything we're familiar with; fraud, lying, cheating, double sets of books, false supplier records; basically everybody is crazy and all these companies are just wounded ducks staggering along.

Fri, 11/19/2010 - 11:04 | 740921 Duuude
Duuude's picture

"...fraud, lying, cheating, double sets of books, false supplier records; basically everybody is crazy and all these companies are just wounded ducks staggering along."

Yer referencing tha Banksters, right ?

Fri, 11/19/2010 - 10:35 | 740839 bobert
bobert's picture

I found GM on Google Finance just in time to watch it drop below $34.00

Oh dear, I'm tearing up.


Fri, 11/19/2010 - 10:56 | 740899 Blano
Blano's picture

Keep watching.  It's working on breaking 33.

Fri, 11/19/2010 - 11:02 | 740916 Careless Whisper
Careless Whisper's picture

verified financial statements based on strong internal controls.

Fri, 11/19/2010 - 10:35 | 740840 moofph
moofph's picture

..."misstatements" on the rise ...go long.

Fri, 11/19/2010 - 11:56 | 741131 Canucklehead
Canucklehead's picture

I have to chuckle about the Canaccord reference.  This is typical of that firm.  Back in the days (80's - 90's) when the Vancouver Stock Exchange was raping and pillaging every little investor who played in the West Coast sandbox, Canaccord was the king of the pirates.

Going forward, it will be very easy to identify prime shorts of Chinese companies.  Go through Canaccord's past recommendations and take the opposite position of that recommended.

It's good to see the Canaccord business model replaced small mineral exploration companies with small Chinese manufacturing companies.  What is next?

Fri, 11/19/2010 - 11:58 | 741141 Dburn
Dburn's picture

Anyone know what happens to the PUTS I have on this stock?

Some expire today and some in Dec.

Muddy Waters just got a booster rocket attached to their credibility.

Fri, 11/19/2010 - 11:59 | 741146 bugs_
bugs_'s picture

Wonder who is on the wrong side of all those RINO puts.

My heart goes out to those holding RINO puts that expire shortly, you were right, you were lucky, but the house can still screw you if you are right and/or lucky.

Fri, 11/19/2010 - 12:07 | 741183 Dburn
Dburn's picture


Bugs ...can you elaborate? Is there any place to find a rule on this situation? Looking at some serious dough for me.

Fri, 11/19/2010 - 12:16 | 741225 Thunderlips
Thunderlips's picture

A famous investor hears the news:

Fri, 11/19/2010 - 12:23 | 741261 Dburn
Dburn's picture

Herte is the word. If the stock doesn't open today, and the Nov options are not in the money they expire worthless. M*****F******s

Fri, 11/19/2010 - 12:35 | 741309 hammerheadjoe
hammerheadjoe's picture

Sitting on Jan 22 ITM Puts - can this actually be shutdown in perpetuity?  What a freakin' racket!

Fri, 11/19/2010 - 13:58 | 741586 Dburn
Dburn's picture

You have a ETF there so that won't stop.But yeah, we are getting fucked.

I've seen a stock halt go on for months.

I read a blurb that most Chinese Companies are too cheap to hire fulltime CFOs and this was from a Bull!!. His complaint in essence was it 's hard to get tranperceny so we can truly find out if a company is undervalued. Then he goes on to mention : Of course ONP, RINO and FUQI don't help too much.

So RINO gets a 100 Million on it's IPO and doesn't hire a fulltime CFO?


Here is another one to do DD on APWR and of course FUQI that just got a delisting notice for non-compliance on issueing financial statements. Huh...wonder what that's all about? heh

Fri, 11/19/2010 - 12:56 | 741390 Thunderlips
Thunderlips's picture

I love that Dirty --- Muddy Waters...


Fri, 11/19/2010 - 14:42 | 741710 Fortunes Favor
Fortunes Favor's picture

A lot of money has been made over the last 3 months in the Chinese new issues. Many of these conpamies are legitimate and will be long term successes. Should gains be booked? Sure booking profits is never a bad thing, but pretending the whole country is a fraud is unproductive and foolish.

The fraudulant companies revealed in China so far have be reverse mergers. RINO is not a recent IPO. It was a reverse merger on 9/21/2007!

Trying to reduce the noise, suppress emotions and keep it real....

Fri, 11/19/2010 - 16:05 | 741935 El Gato
El Gato's picture

NASDAQ is not going to open this fucker today. For all you put buyers of frauds out there like me, factor in a trading halt to your trading strategy. Godamnit.

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