After a brief lull, Alfred Little, whose track record in slaying Chinese fraudcaps is comparable to that of Muddy Waters (just recall the DEER in headlights), has released a report on what he believes is the latest Chinese publicly traded fraud: Sinotech Energy Limited (Nasdaq: CTE), where the catalyst is that its "largest customers and suppliers are likely nothing more than empty shells with little or no sales or income." Notably, this company breaks the mold of the surefire reverse merger frauds, and was actually taken public in an IPO by UBS, Citi and Lazard. Little's price target: somewhere between $0.00 and $0.63, a notable discount from the current price in the mid $3s. Below are the key highlights from the just released report as well as the full 30 page research report in its entirety.
- CTE’s sole import agent accounting for over $100 million worth of oil drilling equipment orders appears to be an empty shell with no sign of operation, a limited import history and negligible revenue base.
- CTE’s sole chemical supplier appears to be an empty shell, with little or no revenues, a deserted office and no signs of production activity.
- Likewise, CTE’s five largest subcontracting customers, providing the vast majority of CTE’s revenues, appear to be shell companies with unverifiable operations and minimal revenues themselves
- CTE’s oil drilling technology is questionable, mispriced and uncompetitive
- CTE’s audited financial statements filed with Chinese Government’s State Administration of Industry and Commerce (SAIC) further confirm its negligible business operations
- CTE’s board of directors lacks independence and effective oversight of management, evidenced by undisclosed related party dealings
- CTE stock is theoretically worth less than $0.63 per share but investors will likely recover nothing
Full report (and for what it's worth the authors have indicated they are short the stock... as would anyone else who is confident they have identified a massive fraud):