janis1023 (43.51)

IMHO, AOB funny business caused drop, lack of publicity caused rebound.

August 06, 2009 – Comments (1) | RELATED TICKERS: AOB , GMO , TGB

 This asensio.com is supposed to be the "King of Shorts", so far all I know this is generated for his benefit.  But once I was down over $500.00 I felt I would be an idiot not to get out.  As usual, I got out, it went back up.  GRRRRRRRRRRR. 

RAE dropped like a rock, GMO took on some water, so by end of day I was down over $1,000.00.  OUCH!!!!  Thank goodness for TGB or I would have been crying like a baby.  I know RAE & GMO are excellent stocks in the long haul so I will continue to add to my position as money allows, and TGB hopefully in the short term haul.  

But since misery loves company, I thought I would share this info with you guys.  It was posted as news on Ameritrade but I haven't seen it anywhere else.

 August 06, 2009

Has AOB Analyst Confirmed CEO Role on Both Sides of Transactions in 2007 and during 2008?

A report released by a sell-side analyst covering AOB, Ding Ding at Susquehanna International Group (SIG), states that she confirmed that "AOB's CEO Mr. Tony Liu is the chairman and director of Golden Dragon." Ding also states, "Golden Dragon or AOB acquired the title of Beijing Century East on 12/30/07." This appears to conflict with AOB's disclosures on the matter in its 2007 and 2008 filings and shareholder communications.

A report released yesterday by asensio.com shows possible documentary evidence that Tony Liu may have been on both sides of $105 million in real estate transactions entered into by AOB, though AOB stated it had "no material relationship" with the seller. A response from AOB's auditors was repeatedly requested for the past month. A response was also requested from AOB's counsel and independent directors. None was received. It now appears that this SIG analyst has apparently obtained some form of confirmation privately from AOB or some informed insider source.

Some obvious questions arise from this apparent confirmation, which were not addressed by the analyst:

-Since the AOB apparently began transactions in 2007, why did AOB not make any disclosures to investors about the 2007 transaction until 2009, after it was completed, and then only disclosed $70 million of the $105 million, and not disclose how much was expensed in 2007 and during 2008, and how the expenditures were funded?

-What safeguards were put in place to protect AOB shareholder and debt holders?

 August 05, 2009

Report Released by asensio.com on AOB's Potential Undisclosed Related Party

A report released today by asensio.com on American Oriental Bioengineering, Inc. (NYSE: AOB) shows that based on Chinese government filings, AOB may have made material omissions and misrepresentations in U.S. Securities and Exchange Commission (SEC) filings concerning two real estate transactions, totaling $104.9 million.

Based on discrepancies between AOB's SEC filings and Chinese filings, it appears that AOB may have completed the two transactions with an undisclosed related party.

Filings with the China State Administration for Industry and Commerce and the Hong Kong Companies Registry show a relationship between AOB's chairman and CEO, Tony Liu, and the private Chinese company that reportedly sold real estate to AOB for approximately $105 million. The Chinese filings are attached to the report with translations.

It does not appear that AOB took standard steps for related-party transactions to ensure that there were no irregularities in the $105 million expenditure. AOB's auditors, independent directors and legal counsel were contacted, but have not provided any comment or explanation for the information contained in the asensio.com report.

Click here to read the asensio.com report, "AOB’s Potential Undisclosed Related Party Documented in Public Government Filings."

 August 05, 2009

AOB Deal Questionable Even Without Undisclosed Relationship between Chairman and Seller

As previously reported by asensio.com, American Oriental Bioengineering, Inc. (NYSE: AOB) paid nearly $105 million in two separate transactions for Beijing-area property to a company that appears to be an undisclosed related party. Click here to read the prior asensio.com report.

However, even without evidence of an undisclosed related party, many of the Wall Street analysts covering AOB were clearly surprised by the $70 million Beijing property acquisition announced in January 2009. Many of the analysts openly questioned the company's decision to make the $70 million expenditure. None of the analysts, though, connected the $70 million transaction with the $34.9 million transaction that occurred in the third quarter of 2008 and that appears to have been conducted with the same related party.

A Piper Jaffray analyst wrote in a report dated January 8, 2009, "AOB used approximately $70m to purchase resort-style properties. We tried really hard, but still are not convinced that is a good use of capital that was intended for pharma company/asset acquisitions. We are downgrading the stock to Sell."

An analyst from Brean Murray Carret & Co. stated in a report dated January 12th that the purchase was "inconsistent with the company's core strength of pharmaceutical manufacturing and marketing," and that "a purchase of such magnitude is unnecessary, in our opinion."

Consistent with the Piper Jaffray analyst's remark that the properties were "resort-style," a later report from Brean Murray, dated March 10th, shows photos of the property AOB acquired: residential apartments, villas, and a club room.

AOB made no announcements to its US investors disclosing an intention to purchase Beijing real estate prior to the $70 million transaction that reportedly occurred on December 31, 2008, the last day of the year. The 8-K announcing the $70 million transaction does not include a purchase agreement and only offers an explanation for the purchase by stating, "AOB intends to use the properties as a Convention and Training Center."

No disclosure is made in AOB's press releases or SEC filings concerning the 'resort-style' nature of the properties. AOB provides no basic description of the 'villas' and residential apartments given by analysts who visited the property.

The 8-K also does not offer an explanation of why AOB management thought it necessary to spend $70 million on a convention and training center in Beijing. AOB made no mention in press releases of the $70 million transaction being connected to the prior $34.9 million transaction. Furthermore, there is no indication from AOB's SEC filings of whether the $34.9 million transaction for Beijing Development Area property is also for the purpose of a "convention and training center," or even whether the $34.9 million was spent on a property separate from the 'resort-style' property visited by analysts.

AOB management apparently felt it necessary to issue a press release two days after the January 8-K to give some justification for the $70 million purchase. The press release, dated January 9, 2009, states that the property transaction positions the company "to secure government support in various forms." Click here to see the press release.

The press release did not elucidate what forms of government support the company hoped to receive for its $105 million expenditure or how the purchase of a "convention and training center" from an apparent related private party would dispose the Chinese government to provide extraordinary support to AOB's existing operations.

Describing the AOB property transaction, an Oppenheimer analyst wrote, "While we wish the investment had been made in core business acquisitions, the money didn’t disappear into thin air," in a report dated January 8, 2009.

Given the questionable commercial value to AOB's business of the property and what appears to be a less-than-arm's-length relationship with the seller, it remains to be seen whether or not some of the money reportedly spent by AOB "didn't disappear into thin air."