GEO Investing
Submitted by Tyler Durden on 01/05/2011 via zerohedg.com

After Muddy Waters came out with research two months ago that singlehandedly destroyed recent Chinese NYSE IPO, RINO, we predicted that there would soon develop a cottage industry of micro investment firms who do diligence on various Chinese frauds (and there are many of them), establish a short base, and subsequently release a research report in the name. Today we get the latest such possible casualty: meet China Green Agriculture, a Xian, China firm founded in 2000, which “engages in the research, development, manufacture, and distribution of humic acid based compound fertilizers in China… The company also engages in the development, production, and distribution of agricultural products, including fruits, vegetables, flowers, and colored seedlings.” Sure enough the company IPOed on the NYSE in mid-2008, and if the just released research report by J Capital Research is correct, the firm is about to join such other disgraces as RINO in the NYSE IPO dunce corner. To wit: “In this report, we present compelling evidence that China Green Agriculture (NYSE:CGA) has significantly over-stated its true revenues and earnings. We estimate that CGA’s value is no more than $2.85 per share, as opposed to its current market price of $9.”

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7 Comments

    1. Maj Soueidan

      Point Taken. Title revised accordingly, although anyone who follows us would generally not get confused knowing the nature and subject matter of our content here and elsewhere.

  3. Maj

    Wout,

    I think ENHD does not care anymore. They just delisted their stock so they do not have to stay current with reporting information to the SEC.

    Maj

  4. Dan France

    I have tried to maintain objectivity regarding CGA with a bias toward believing the Company would somehow survive all of the allegations of fraud that have been launched against it. Today I read J Capital’s January 2011 research report detailing the basis for the firm’s short position in CGA and found it compelling. I have no idea how things will play out for CGA but there are certainly less controversial stocks in the China small cap space. See link to research report and draw your own conclusions.

    http://www.jcapitalresearch.com/mkI43HeK8i7F2/CGA_Report_January%202011.pdf

  5. wout van ganswijk

    and what about enhd (.pk or .ob)? accountant is s.wong @ co. shouldn’t they inform the public?
    sincerely
    wvg

  6. Dan France

    I think we can safely assume that E&Y in its capacity as internal auditing and SOX consultants reviewed the amended Form 10-K/A recently filed with the SEC and are working their way from oldest to most recent filings. Given the furor surrounding differences between SAIC, SAT and SEC filings we can further assume that E&Y took a look at those documents before the amended 10-K was filed. That means that CGA’s financial statements are probably okay, as amended, at June 30, 2009.

    The real challenge is 2010. Let’s see if the land transaction that management refuses to disclose who the seller was and other issues associated with the R&D facilities come to the surface.

    My guess is E&Y was unwilling to accept responsibility as CGA’s auditor and what we are seeing unfold is prolonged due diligence on the Big 4 firm’s part. If E&Y reaches a comfort level with CGA they will likely be engaged as auditor. If not they will collect handsome fees for their work and exit the situation.

    I know it is sexy and more interesting to assume all Chinese small caps are fraudulent but it is possible CGA will survive this process most likely with embarrassing disclosures concerning related party transactions with its Chairman. Of course it is also possible the entire situation blows up! Time will tell.

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