China Electric Motor (NASDAQOTH:CELM)

CAPS Rating: 4 out of 5


Player Avatar TMFCop (86.16) Submitted: 10/31/2010 7:24:27 AM : Underperform Start Price: $5.01 CELM Score: +96.31

Company ran afoul of Sarbanes-Oxley right out of the IPO gate by giving the wife of its chairman and mother of its CEO $1.3 million for an acquisition it supposedly wanted to make. Strange how it also totaled the same amount of a loan she had made to the company but supposedly extinguished with a stock transfer when it IPO'd.Considering CEM bought up a bunch of companies she was running a few years ago, I wouldn't be surprised to see more skeletons falling out of the closet in the future.

Member Avatar GorillaGorilla (< 20) Submitted: 11/20/2010 10:59:21 AM
Recs: 2

Your right, however, it's not unusual for Chinese companies to have these transaction. Obviously, at the same time these are unacceptable in a publicly traded company.

People buy IPO's because it allows them to get in early at a cheap price but in doing so you take the risk the company is poorly led, fraudulent or naive.

CELM, as an IPO, had a grace period to implement Sabine-Oxley - a year I think. However, to their credit they got it done immediately and hired a top4 firm to do it [1]. Who pointed out the insider transaction which has been dealt with.

CELM also intends to upgrade their auditor - once again not the work of a company trying to work in the shadows. I intend to give CELM the benefit of the doubt knowing that the auditing is being beefed up - others might not.

I would also say that , the CFO, is very open to questions even from small shareholders like myself.



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