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TRE - Sino-forest put.


alertmeipp
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It's Carson Block's China-RTO centered research website.  He does extensive research, takes a short position/puts/whatever, THEN releases the report.

 

http://www.muddywatersresearch.com/wp-content/uploads/2011/06/MW_TRE_060211.pdf

 

Must have some following. I can't remember a stock having trading halted over an analysts report. I'm assuming they were short before the release. :o ;)

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It's Carson Block's China-RTO centered research website.  He does extensive research, takes a short position/puts/whatever, THEN releases the report.

 

http://www.muddywatersresearch.com/wp-content/uploads/2011/06/MW_TRE_060211.pdf

 

Must have some following. I can't remember a stock having trading halted over an analysts report. I'm assuming they were short before the release. :o ;)

 

The stock was acting really weak in last month or so. I was thinking it has to do with stocks like CCME causing concerns on Chinese-related stocks. Now, I think someone was building short positions and was the reason why the puts was so pricey.  :'(

 

 

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Yea, Indirect, I held Sino up to around 5 years ago.  I sold after I tripled my money but well before the stock every reached $10.  Remember Df Canuck who used to recommend this every couple of months.  

 

I never thought it was fraudulent and management seemed honest enough.  That being said, it is difficult to value and verify.  They get independent auditors reports on their forest reserves the same as any one else but what exactly is the value of a Eucalyptus forest in China.  They have an enormous growth story but it is only as good as its auditors.  This is where dividends come in.  They should install at least a 2% quarterly dividend to return money to shareholders.  It would be a show of good faith and would help separate them from the real frauds.

 

On the other hand maybe they are and always have been a fraud.  But then Ernst and Young is going to be going the way of Arthur Anderson.  

 

Qualifier:  I have not followed this company since it got overvalued.  

 

I may start watching again depending how management handles this situation.

 

Finally,  management should cobble together a response with the backing of their auditor within a couple of hours regardless of the time diffferential.

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As for Carson Block and his Muddy Waters organization.  Does it not seem a little sleazy to put out a research report on a company you hold to drive down the stock price? 

 

My question regarding him is this:  Did he sell his short positions today or is he still in it?  If he has stayed in it he has conviction and is giving management time to prove him wrong.  If he just drove it down to make a quick buck then he is in for a SAC type future with lawsuits and investigations wiithout the protection and capital base of SAC.

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A little more balanced perspective:

 

http://www.bloomberg.com/news/2011-06-02/sino-forest-plunges-as-short-seller-targets-stock-that-paulson-s-fund-owns.html

 

Your going to have to convince me that Paulson, who holds hundreds of millions of this stock, and Davis, didn't do their background research.  If this is found fraudulent alot of careers are going to end. 

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Muddy Waters timed the report really well. It's released right after Sino had the conference call to explain how good they are and will be.

It's hard to gather the board and mangement at late night, let alone the auditors and I don't think the auditors will do a join press release.

 

To counter this properly, they need to be well-prepared - release the quarter result, announce buyback, and management buy in.

 

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As for Carson Block and his Muddy Waters organization.  Does it not seem a little sleazy to put out a research report on a company you hold to drive down the stock price? 

 

My question regarding him is this:  Did he sell his short positions today or is he still in it?  If he has stayed in it he has conviction and is giving management time to prove him wrong.  If he just drove it down to make a quick buck then he is in for a SAC type future with lawsuits and investigations wiithout the protection and capital base of SAC.

 

It all comes down to the quality and integrity of his research.  If he's correct, there is absolutely nothing sleazy about it.  Do you think it's sleazy of Whitney Tilson and T2 to put out powerpoint after powerpoint touting BRK.A and MSFT?

 

I know folks on this board dislike short sellers from the FFH days, but who else will effectively police the frauds in the securities markets?  The last couple of years of China research was very eye opening for me.  I had not been to China until last year.

 

I recommend the book "Mr. China" by Clissold as a classic for anyone thinking about investing in or doing business with China-based companies.

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Guest broxburnboy

If TRE is a fraud, it's a long running one. I remember owning this for a few years in 98-02 and the analyst's were saying the same sort of thing about it. Back then a lot of their profits came from brokering wood chips as opposed to growing their own, which made it seem sort of questionable.

I think there is an equal or greater chance that the attacking hedge fund has the same sort of ethics as SAC in the SAC/FFH short attack.

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If all the puts I sold get exercised, TRE.TO will be become a sizable position for me at cost base of 14-15 bucks.

 

Buying call maybe be viable as the lowest strike is 16 bucks (or else I would have put a spread instead of short put!). If TRE comes back with credible response, it won't be cheap anymore. If not, $16 strike is probably too expensive even at 5 cents.

 

The US + CDN (halted mid-afternoon) volume combined is about 20M - most of the volume is traded above at teens. So we are talking about ~200M worth of volume. 10% of the float. Will see how it goes when TRE responds.

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t all comes down to the quality and integrity of his research.  If he's correct, there is absolutely nothing sleazy about it.  Do you think it's sleazy of Whitney Tilson and T2 to put out powerpoint after powerpoint touting BRK.A and MSFT?

 

I know folks on this board dislike short sellers from the FFH days, but who else will effectively police the frauds in the securities markets?  The last couple of years of China research was very eye opening for me.  I had not been to China until last year.

 

I recommend the book "Mr. China" by Clissold as a classic for anyone thinking about investing in or doing business with China-based companies.

 

I agree completely. And the value of short sellers is not limited to detecting frauds; if not for them, LinkedIn would still be trading at 40x "normalized EBITDA", itself a very generous estimate.

 

Having "smart money" players investing alongside you (while better than not, I suppose) is not a foolproof Buy signal in and of itself. The recent RTO blowups all involve some institutional participation, from Hank Greenberg's Starr International to some of the biggest PE funds (employing the most well-paid and ,on occassions, smartest guys  :)) on Wall St.

 

I happen to find Muddy Water's deep-dive work, albeit undoubtedly containing a certain degree of exaggerations, to be persuasive. Then again I don't know my way around the Chinese accounting system nearly as much as the players involved.

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Alert, curious, what market did you sell your puts on?

 

CDE - Montreal exchange, it was a stupid trade looking back.

I sold some 16,17,18 puts almost in the last few days.

Hope it's not a complete fraud. 0094.hk is also halted pending news.

 

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t all comes down to the quality and integrity of his research.  If he's correct, there is absolutely nothing sleazy about it.  Do you think it's sleazy of Whitney Tilson and T2 to put out powerpoint after powerpoint touting BRK.A and MSFT?

 

I know folks on this board dislike short sellers from the FFH days, but who else will effectively police the frauds in the securities markets?  The last couple of years of China research was very eye opening for me.  I had not been to China until last year.

 

I recommend the book "Mr. China" by Clissold as a classic for anyone thinking about investing in or doing business with China-based companies.

 

I agree completely. And the value of short sellers is not limited to detecting frauds; if not for them, LinkedIn would still be trading at 40x "normalized EBITDA", itself a very generous estimate.

 

Having "smart money" players investing alongside you (while better than not, I suppose) is not a foolproof Buy signal in and of itself. The recent RTO blowups all involve some institutional participation, from Hank Greenberg's Starr International to some of the biggest PE funds (employing the most well-paid and ,on occassions, smartest guys  :)) on Wall St.

 

I happen to find Muddy Water's deep-dive work, albeit undoubtedly containing a certain degree of exaggerations, to be persuasive. Then again I don't know my way around the Chinese accounting system nearly as much as the players involved.

 

The problem I have with the report is there is quite a bit of guess work and assumption used. I don't want to go in to details because I don't want to look more stupid. LOL. ;)

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