GEO Investing

On December 18, 2012 we issued our preliminary on-the-ground due diligence (DD) findings on Cleantech Solutions International, Inc. (CLNT).  While in some cases we believe that preliminary DD is sufficient enough to form a definitive conclusion regarding a ChinaHybrid operation, sometimes we require more.  This is the case with CLNT.

We appreciate the efforts of the company’s Investor Relations firm who arranged a conversation for us with the CLNT management team in order to discuss a more thorough DD process.   Some of our requests included:

  • Independent verification of cash accounts;
  • Independent verification SAIC/SAT filings;
  • Independent video coverage of manufacturing operations;
  • A list of top/current customers and suppliers.

Unfortunately, CLNT management has informed us that they cannot comply with our request at this time.  Here’s what the company indicated they may be willing to do:

  • Provide their own real-time video records of their factories;
  • SAIC/SAT/bank statements that the company provided to its auditor (not independently);
  • Allow the opportunity to interview current customers/suppliers.

To management’s credit they seem willing to provide us with certain documentation and DD materials, similar to those that they submit to their auditor.  However, we require a more independent process of gathering DD information.  This is undoubtedly the case with CLNT because the company retains the services of Sherb, an auditor that has been previously associated with controversial ChinaHybrid companies.

Furthermore, CLNT has had what we consider to be a history of high CFO turnover.  We are also concerned that the company filed an S-3 (shelf filing) on April 25, 2013 with the stock trading at low valuation multiples and allowing the company to raise up to $5 million using dilutive securities. Given these developments, we cannot further validate CLNT’s operations.

We believe that the steps we outlined are necessary for CLNT to gain investor confidence, see an expansion in valuation multiples and be in a position to attract growth capital at reasonable terms.

As we continue to call for a cleansing of the ChinaHybrid space, we as investors have exercised our right not to invest. In doing so, we have helped to create what could be a fantastic value opportunity if management teams begin to trust that our true motives are to help them gain investor confidence.   It is time that we collectively let these companies know that if they want our money, certain conditions MUST be met:

  • Complete transparency with an openness to independent review;
  • Quality management that cares about investors;
  • Quality advisors: Law Firms, Auditors, IR, and Investment Bankers who have not been tainted over and over again with fraud associations.

This does not seem like so much to ask for, but we are still looking for that one company.


You agree that you shall not republish or redistribute in any medium any information on the GeoInvesting website without our express written authorization. You acknowledge that GeoInvesting is not registered as an exchange, broker-dealer or investment advisor under any federal or state securities laws, and that GeoInvesting has not provided you with any individualized investment advice or information. Nothing in the website should be construed to be an offer or sale of any security. You should consult your financial advisor before making any investment decision or engaging in any securities transaction as investing in any securities mentioned in the website may or may not be suitable to you or for your particular circumstances. GeoInvesting, its affiliates, and the third party information providers providing content to the website may hold short positions, long positions or options in securities mentioned in the website and related documents and otherwise may effect purchase or sale transactions in such securities.

GeoInvesting, its affiliates, and the information providers make no warranties, express or implied, as to the accuracy, adequacy or completeness of any of the information contained in the website. All such materials are provided to you on an ‘as is’ basis, without any warranties as to merchantability or fitness neither for a particular purpose or use nor with respect to the results which may be obtained from the use of such materials. GeoInvesting, its affiliates, and the information providers shall have no responsibility or liability for any errors or omissions nor shall they be liable for any damages, whether direct or indirect, special or consequential even if they have been advised of the possibility of such damages. In no event shall the liability of GeoInvesting, any of its affiliates, or the information providers pursuant to any cause of action, whether in contract, tort, or otherwise exceed the fee paid by you for access to such materials in the month in which such cause of action is alleged to have arisen. Furthermore, GeoInvesting shall have no responsibility or liability for delays or failures due to circumstances beyond its control.