China Biotics (NASDAQ:CHBT) – The Best Research You Haven’t Seen.

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   Citron Reprints Forensic Research that shows China-Biotics is lying about their customers and production.

 

 

The market is now brimming with stories on the fraud in the China RTO space.   We are witnessing the unprecedented reality of more than a dozen companies domiciled in China and trading on major US exchanges, to be halted by regulators and now queued up for delisting. 

http://www.reuters.com/article/2011/05/11/us-china-shortsellers-idUSTRE74A71F20110511

  Brief History Lesson

Long before this space became crowded with investigative researches trying to hunt down the needlelike facts in the haystack of hype that is smallcap investing in China, Citron was there.   In fact, we would like our new readers to appreciate that in May 2007, Citron broke the story about its first China-domiciled stock scam.  

Xinhua Finance Media Limited (NASDAQ:XFML) apparently had pretty good credentials too.  Brought public via the “high road”, an IPO by JP Morgan and UBS in March 2007, XFML was a $12 to $14 stock with credibility, analyst coverage, and a bright future.   Its CEO rang the opening bell on the Nasdaq when its IPO opened.   The only problem was it was a complete scam, as reported by Citron in May 2007.

http://citronresearch.com/index.php/2007/05/21/citron-reports-on-xinhua-finance-media/

Yes, there was much umbrage taken.   Analysts such as JP Morgan and CIBC reiterated their buy recommendations on the stock, with CIBC calling the situation a “good buying opportunity” on “weakness” in the wake of the Citron report.   http://caps.fool.com/Blogs/analyst-says-xfml-good-buying/8284  

Although the stock slid into single digits, interest perked up when no less than Yucaipa Funds, led by highly regarded investor Ron Burkle, announced in September 2007 that it was taking a major equity position in the company.   http://www.reuters.com/article/2007/09/26/xinhua-yucaipa-idUSN2617968220070926

By the end of 2008 XFML was a penny stock.  It had cratered not because of Citron’s report, but because it was, as Citron reported, a collection of self-dealing and related-party rollup transactions designed solely to enrich its promoters and scam investors.

Yesterday, criminal indictments were handed down, charging the principals involved with stock fraud.  

For the rest of the lesson, readers compare the original Citron report in May 2007 (linked above), with the Wall Street Journal article published yesterday. 

http://online.wsj.com/article/SB10001424052748704681904576317022268762608.html?mod=googlenews_wsj

  Current Situation

Today, Citron revisits a stock first reported last September, the curious case of China-Biotics (NASDAQ:CHBT).   Now China-Biotics isn’t a high-prestige name taken public by Wall Street’s finest.  In fact they lost support of all of their analysts.

Nothing the company has said about its operations, either then or since, has checked out.   

In the interest of the truth, Citron understands that good research comes from many different sources. With permission of the publisher, Citron today shares a forensic research piece written by a firm specializing in on-the-ground research in China called China Economic Review.  We believe this is the best piece of research on China Biotics that you probably have never seen.

Clkck Here:    CER — China Biotics Research

The last line of defense separating the continued fleecing of US investors in these names is the company’s annual audit.   And that brings us to the flurry of halted stocks in March, because that is when those companies’ audits were due.  China Biotics is on a March 31 fiscal year, so it and a batch of other companies don’t face their day of judgment until June 15th.  Next month, Citron predicts investors will see another flurry of news and stock halts, as the next wave of this story hits.

Cautious Investing to All