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China Agritech: An Internet Study



March 30, 2011 – Comments (4) | RELATED TICKERS: CAGC.PK.DL

China Agritech (CAGC) is one of the small cap Chinese reverse merger companies recently to come under attack by short sellers and in particular bloggers and very small "research" firms.  As a result of the pressure and timing of the pressure, the company's stock has dropped by over 60% recently. 

This short post is not to persuade anybody about what to do with CAGC as an investment.  I disclose I went long just before the stock was halted.

This post is simply open wonderment at the state of influence the internet has on small investors.  Investors who by and large have little or no emotional control and no clue how to research something for themselves.  These "investors" (I use that term very lightly) resort to applying rumor and innuendo repeatedly to their investment decisions, then complain and whine when things don't go their way.  Through it all they fail repeatedly to apply even a minimum of mathematical reasoning to their considerations.

Adding to my amazement, and really what stirred me to post, was a new development with China Agritech.  Yesterday, or the day before, the very reputable firm Glickenhaus located in New York apparently started posting on the Yahoo message board for CAGC about the recent research they had done on the company, which is posted on their website.

I am amazed because a legitimate established investment house decided to take the war to the investment guerrilla's turf.  Battling them on the internet.  I wonder if this is the shot across the bow that could clean up some of the pump and dump, and short and burn, scams that are so rampant.  One can hope.

Kirk Spano, aka, kirkydu

Bluemound Asset Management, LLC

4 Comments – Post Your Own

#1) On March 30, 2011 at 2:45 AM, awallejr (34.04) wrote:

I am sorry, I personally don't trust Chinese numbers.  They pirate whatever they can.  They spam wherever they can.  They outright try to steal things over the internet whenever they can.  You want to invest in these companies be my guest, but I will stick with the good old USofA and invest in companies here that try to do business in emerging markets.  Yeah Enrons happen, but I'll take my chances.

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#2) On March 30, 2011 at 8:33 AM, kirkydu (90.68) wrote:

Fair enough.  But, I have to make money for clients however I can.  The U.S. is approaching over valued territory while China is closer to under valued.  Frankly, it's safer to invest in China and some other foriegn markets right now than the U.S., in a broader sense.  I am still half in the U.S., though I expect to be down to 1/4 soon, which better matches our share of global GDP.

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#3) On March 30, 2011 at 2:29 PM, EnigmaDude (58.61) wrote:

I agree that there are some good potential investments in China right now, and some Chinese firms are being lumped in with the "bad" ones.  But this company in particular is in the midst of a class-action lawsuit that would explain the dramatic drop in its stock:

"China Agritech, through its subsidiaries, manufactures and sells organic liquid compound fertilizers, organic granular compound fertilizers, and related agricultural products in the People's Republic of China. The Complaint alleges that the defendants issued false and/or misleading statements and/or failed to disclose that, among other things: (1) certain of the Company's manufacturing facilities were idle or producing far less fertilizer than the Company portrayed; (2) the Company did not have the equipment to support its claimed production capacity; (3) the Company did not receive a license to manufacture granular compound fertilizer; (4) the Company had misrepresented its fertilizer production levels and sales; and (5), as a result of the foregoing, the Company's statements were materially false and misleading at all relevant times."

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#4) On April 05, 2011 at 11:04 AM, kirkydu (90.68) wrote:

There is no class action lawsuit at the moment, they can not find a lead plaintiff.  Most of the Chinese companies that have gotten battered are due to guilt by association with the few that deserved to be battered.

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