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Xinyuan Real Estate Co., Ltd. Message Board

  • hmmm26 hmmm26 Nov 16, 2012 3:40 PM Flag

    Why Did Blue Ridge Sell? Two Decent Theories

    Two theories have presented themselves as to why Blue Ridge sold its XIN position. If you have others, please post them. If you're long XIN, # 2's the theory to root for.

    1. Declining Profits Theory.

    With so little analyst coverage, getting revenue and profit estimates for XIN's future quarters has basically become impossible. As far as I know, the only remaining source for those numbers is XIN's CFO, and while his comments on the recent conference call were vague, they definitely implied year over year declines in revenues and profits, at least for the next 3 Q's (see "XIN's Revenues and Earnings for Next 5 Q's" thread for more details).

    However, the important question of "how MUCH lower?" remains unanswered.

    With better access to the actual numbers than we have, BR might know the answer to that question and they might not have loved it.

    2. Conflict Over Dividends Theory.

    Did XIN and BR fall out over Dividend policy? If yes, it would be good news for shareholders, since the explanation doesn't indict any fundamental aspect of XIN known by BR that's not known by the public (steeply declining profits, fraud, whatever -- all the possibilities are bad).

    And there's a solid reason that a 13 million share owner of XIN might be ticked at Management. Earlier this year, XIN cleverly saved itself a year's worth of dividends by switching from the usual, retrospective way of paying dividends to a prospective, quarterly method.

    In early 2011 (March, April, somewhere in there), XIN paid a .10, retrospective dividend for FY 2010. A year later, XIN announced another dividend, but changed its payment system to quarterly and prospective, and announced that the new .16 dividend was for FY 2012. Dividends for FY 2011 were skipped altogether, but it was an easy thing to miss.

    That's not likely to bother retail investors like you and me. In fact, I suspect very few us even noticed, but if we happened to own 13 million shares like BR, our view of the maneuver might be less admiring and considerably more hostile. The skipped dividend payment would've totalled $1.3 million to $2.1 million, enough, it seems to me, to strain a working relationship.

    There's one other piece of evidence supporting this theory: Timing. We know that BR started selling its position between April 1 and June 30th. That's the same time period within which the dividend policy was changed.

    It might also be the same time period within which Jeff Tang(?), the BR affiliated member of XIN's Board of Directors was kicked off the board, but I could use confirmation on the timing of that, if anyone knows it specifically. If he stepped down during the same timeframe, it certainly strengthens the evidence supporting this theory.

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    • The latest Seeking Alpha article featuring XIN has a comment about this and it provides another theory, BR's insider left the directors and therefore BR no longer had their inside info and didn't find it worth the risk without them.

    • Its good to have you on this message board you always have good analysis and its always well written. I actually sold and then bought back in once I found out blue ridge was done selling this will take a lot of the downward pressure off. Im hoping Xin will pick up more land in the next few Qs and up the dividend a substantial amount or up it a little and continue with another buyback. Based on there history thats all very likely.

      Sentiment: Buy

      • 2 Replies to pmurphy986
      • Thanks, pmurphy, that's nice to hear.

        I'm not sure whether Blue Ridge's sales were made on the open market or in private transactions, but whatever downward pressure was exerted by those sales, it definitely ended by Sept 30th.

        I'll bump up a thread written by DoubleJ called "Some Simple Math" where he indicates the total amount of XIN shares traded in 3Q was 19 million. If we subtract out the 11 million shares supposedly sold by BR on the public market, that only leaves 8 million total shares sold, or an average of only about 133k per day.

        If you review the "historical quotes" data from XIN's Nasdaq page, it becomes clear pretty quickly that an average volume of 133k per day is essentially impossible. For that to happen, (non BR) volume would've had to completely crash that quarter, way below the volume numbers for the quarters immediately before or immediately after 3Q.

        I think it's more likely that BR's shares were sold either exclusively or at least partially in private transactions.

      • I believe they may have sold to wind up the fund. Blue Ridge had not sold before. They were an original investor, prior to IPO. They made decent money on their investment. The fund was a partnership between blue ridge and an outside partner, Jason Tang. Blue Ridge and Jason apparently went separate ways...

 
XIN
2.345-0.025(-1.05%)Dec 24 1:00 PMEST

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