Yes, Q4 wasn't great due to the A/R issue. However, fraud risk is the much more important factor as the valuation is extremely compelling with a PE near 2!! This risk is now reduced substantially with another year of audited results!
I'm not sure that the Short thesis for YONG in particular has anything to do with fraud. I believe now it is just a simple case of a stock with a "perfectly small" float and a RETAIL ONLY (mostly), enthusiastic retail buying group (no big funds to contend with). This makes for a VERY RIPE environment for manipulation...wouldn't matter if it were a US or China stock. The conditions are perfect for manipulation in both directions and they can make a lot of money by moving it both ways.
Just my .02. I'm not saying that it didn't start by using the FEAR from fraud...I just think now, there is absolutely no way they could be using fraud as a major thesis. It has moved on to the "just too easy" category and the more hedgies that find out Just how easy it is, it will continue until management or large investors do something about it. Then, it will be OVER VERY QUICKLY and this thing will take off. Thus, my large core position and a nice swing trade at the same time!
Unfortunately so far the money has been made pretty much only in the down direction. Seems like that trade has pretty much been played out now. Hopefully some larger players will start taking the opposite side of the trade and run it up here at some point. You would think someone would see that as an opportunity given the small float and large short position.
It is, really, as expected. With exception of the lower AR, which again given exceptional growth isn't so surprising. Frankly, any other company that came in with such numbers would have doubled today, but the attacks on YONG have been so successful that enough fear exists to scare any slightly weak hands. Add a few pct of the float for buyers looking for a quick 10-20% uptick, getting stopped out, and you have what we live with currently. Growth, projected growth, generally good numbers, crazy low valuation, clean and in-depth audit, in a Yongye world that equals 10-20% share drop.
I wanted to be surprised, but am not. I suppose it does help me continue to add to my core position. :D
You are correct...valuation is at ridiculous levels but you have to ride this out and as makin_ said keep something for the dip because the short position on this is not going to give up easily. $3.50 will fall, probably temporarily but the shorts want to trigger all the stop losses to get some volume for them to cover some of their positions.
There’s enough volume today for some shorts to get out if they think the attack isn’t worth the risk anymore. Hit pieces will be ignored going forward. There seems to be lots of support at $3.50. Most shorts will get out ahead or even at $3.50. The big question now is, will interest wane again and create low volume. That’s when they can work their game.