If Deloitte was their auditor for 6 years and never suspected anything, it could happen anytime with anyone So I'm not saying
the fraud has anything to do with Tom G. But, you must admit with
sentiment the way it is about almost any chinese stock, and you have
a CFO, even if distantly related to a fraud company, it can, and
probably has had an effect on XIN, but who knows. As one person mentioned the short position is low, and half of what it was in August.
Fraud includes exaggerating the numbers. That's what Enron did. The company files with the SEC and there is no investigation of Xin or any lawsuits against them. But it's up to each person to do his own DD and form his own conclusion.
Interestingly eLong - the other company Gurnee is a director at - trades at a PE of 100x +. Also, the fact that he was the chairman of the audit committee at Longtop doesn't mean he is directly at fault for the fraud. He was an independent director (someone who's role it should be to make sure the internal directors do things right). FYI, this is old news...
With a P/E of 1.5 and a forward P/E of 1. I would say it's priced in. Yes chinese ADR's are hard to trust and real estate has skied. Yes there are frauds. At this point though, if you invest in XIN the ONLY way you lose is if it's a fraud. Other than that a 1 P/E is absurd. They bought back shares, paid a divvy, missed in 1Q and missed in 2009. Most "frauds" don't do the things I listed. Also short interest is a measly 230k shares. They have been around since 1997 and IPO'd in 2007. They have a trusted auditor in E&Y, most of you already know all this. Why does it trade this low? We can argue til we are blue in the face. The fact is place your bet and whatever the outcome is congratulate the winner whether it be long or short. My bet is placed on long. We'll see how it plays out, it's only a small position of 4% of my portfolio. I like my chances.
It doesn't mean the company doesn't exist, it means the numbers could be exaggerated. Here's a more recent link talking about "immunity".