A company is really as valuable since it's balance sheet says it is but what if that balance sheet is a work of pure fiction. Increasingly it has been seen to be the case in companies from emerging markets. Muddy Waters Research along with other companies appreciate this. Some have profited by it by doing real research that goes beyond just examining the books presented.
Shares of Sino Forest collapsed on Thursday 2 June 2011 after a negative research report by Muddy Waters Research. The report alleged that Sino-Forest had been fraudulently inflating its assets and earnings, which the company shares were essentially worthless. The report claimed that Sino Forest was a "multibillion-dollar Ponzi scheme". Sino Forest denied the report and started a completely independent investigation by PriceWaterhouseCoopers.
The stock have been as high at $25 two months before the report was released. The stock opened at $18.21 on June 2nd and closed at $14.46, a 20.59% eventually drop. By April 18, 2012 the stock is at $4.81. Noted investor John Paulsonreportedly sold his entire stake in an estimated lack of $720 million.
On March 30, 2012 Sino-Forest filed for bankruptcy protection in Canada and that the company would be sold or restructured. Sino-Foreststated they would Muddy Waters but it is questionable when they could be successful his or her shares had been suspended through the Ontario Securities Commission which is reported to possess cited that Sino-Forest had engaged in practices they "knew or should have known" perpetuated a fraud.
It is not just Chinese firms that are now being charged with playing fast and loose using the books. Many companies and individuals foresaw the collapse from the sub prime mortgage market and purchased Credit Default Swaps, CD, on bundles of sub prime loans which were with a rating of investment grade by major rating agencies. The concept behind these sub prime investment bundles was that any loan that was poorly under written would somehow be safe when pooled with a block of poorly underwritten loans as people always do what they have to pay their mortgages and real-estate never declines. This relies on the higher fool theory of investment high will always be a larger fool coming along who will get your asset in excess of you paid.
CD can be bought on assets that the purchasing party has no contact with. This is known as a Naked CD. This really is equivalent to purchasing life insurance coverage in your neighbor who's a motorbike riding, base cliff jumping, scuba diver, crystal meth addict. Its better than that, they don't know you bought the life insurance so when you fall off a case of whisky and a handgun, they do not know you have an incentive on their behalf having an accident.
Now knowing that something is a Potential Over-risk Security, POS and being able to make money from it are two various things. Buying Naked CD or short selling wont do you worthwhile unless everybody else finds out the stock or investment is really a POS. This is why following the position is taken it's in the welfare of the entity holding the counter position that the negative information comes out. Whether it takes too long your short positions could expire and you could generate losses or you could keep paying fees to keep your CD "Insurance" position. I put insurance in speech marks as although it is just like insurance, it is not legally called insurance if it were, it would be regulated and who'd ever allow you to buy insurance on your neighbor dying without their knowledge. Well companies did, but that is for another day. This information is about short selling and CD, well actually it's not. It's about showing the way a POS article designed in around Fifteen minutes will be listed in online article depositories and track how many instances show up with time. This is all part of a burglar presentation demonstration to show how items proliferate which a passionate effort involving well financed parties trying to manipulate employed in addition to hackers could affect the loan industry.
Shares of Sino Forest collapsed on Thursday 2 June 2011 after a negative research report by Muddy Waters Research. The report alleged that Sino-Forest had been fraudulently inflating its assets and earnings, which the company shares were essentially worthless. The report claimed that Sino Forest was a "multibillion-dollar Ponzi scheme". Sino Forest denied the report and started a completely independent investigation by PriceWaterhouseCoopers.
The stock have been as high at $25 two months before the report was released. The stock opened at $18.21 on June 2nd and closed at $14.46, a 20.59% eventually drop. By April 18, 2012 the stock is at $4.81. Noted investor John Paulsonreportedly sold his entire stake in an estimated lack of $720 million.
On March 30, 2012 Sino-Forest filed for bankruptcy protection in Canada and that the company would be sold or restructured. Sino-Foreststated they would Muddy Waters but it is questionable when they could be successful his or her shares had been suspended through the Ontario Securities Commission which is reported to possess cited that Sino-Forest had engaged in practices they "knew or should have known" perpetuated a fraud.
It is not just Chinese firms that are now being charged with playing fast and loose using the books. Many companies and individuals foresaw the collapse from the sub prime mortgage market and purchased Credit Default Swaps, CD, on bundles of sub prime loans which were with a rating of investment grade by major rating agencies. The concept behind these sub prime investment bundles was that any loan that was poorly under written would somehow be safe when pooled with a block of poorly underwritten loans as people always do what they have to pay their mortgages and real-estate never declines. This relies on the higher fool theory of investment high will always be a larger fool coming along who will get your asset in excess of you paid.
CD can be bought on assets that the purchasing party has no contact with. This is known as a Naked CD. This really is equivalent to purchasing life insurance coverage in your neighbor who's a motorbike riding, base cliff jumping, scuba diver, crystal meth addict. Its better than that, they don't know you bought the life insurance so when you fall off a case of whisky and a handgun, they do not know you have an incentive on their behalf having an accident.
Now knowing that something is a Potential Over-risk Security, POS and being able to make money from it are two various things. Buying Naked CD or short selling wont do you worthwhile unless everybody else finds out the stock or investment is really a POS. This is why following the position is taken it's in the welfare of the entity holding the counter position that the negative information comes out. Whether it takes too long your short positions could expire and you could generate losses or you could keep paying fees to keep your CD "Insurance" position. I put insurance in speech marks as although it is just like insurance, it is not legally called insurance if it were, it would be regulated and who'd ever allow you to buy insurance on your neighbor dying without their knowledge. Well companies did, but that is for another day. This information is about short selling and CD, well actually it's not. It's about showing the way a POS article designed in around Fifteen minutes will be listed in online article depositories and track how many instances show up with time. This is all part of a burglar presentation demonstration to show how items proliferate which a passionate effort involving well financed parties trying to manipulate employed in addition to hackers could affect the loan industry.
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