Audit risk is high when an auditor signs up with a client with weak internal control, an incompetent staff, or an intent to cheat, or when an audit team is not capable or experienced enough to uncover potential issues. There are many many quality professionals in Big 4-as a matter of fact, they have most accounting and auditing elites in the world with them, but they also hire many fresh out of school yound inexperienced boys and girls doing the actual audit work, and if the senior associate, manager, or senior manager of the team is not experienced enough to identify the audit errors, a company can just get away with it-there is no way for a partner to find it otherwise if a senior manager didn't get it.
Don't be surprised that an auditor make mistakes, sometimes very serious mistakes. If you were an auditor, you could make the same kind of mistake PwC made.
Having said this, I still believe NQ had weak internal control as DT report indicated. Now its stock is in a very dire situation. But its business is not as bad as what MW alleged. NQ is right to take action on its audit committee. Hopefully it will get DT in asap to move it forward.
An auditor is concerned with audit risk and audit fee with its client. PwC is in an awkward position: Deloitte found some issues they didn't find as NQ auditors. PwC's audit risk is high, very high, at least perceived so by PwC itself. It needs to redo DT's work to prove the findings are accurate or not, and on top of it, need to go back to days when NQ was still private to find out whatever irregularities of numbers they audited. So it is not surprising that PwC may need at least 9-12 months to get its job done.
Any big 4 auditor would ask for the same thing, except for DT. It already spent 8 months in the investigation and should be very familiar with the company operations and financials. Any work from here would be built on this solid basis.
NQ management did a very bad job talking about "considering"-plainly stupid. If it didn't have any agreement, don't say anything. Next time I wish it talks something positive or at least constructive, like have PwC out and DT in as its auditor.
As DT confirmed no fraud, it is virtually impossible for PwC to find it otherwise. But because DT found significant internal control issues, PwC has to treat it very carefully. I have dealt with all these Big 4 auditors for many years-they are very good at accounting and auditing, but they are all very proud, sometimes so proud that they found it extremely difficult to admit they made mistakes, especially in this case-it is quite different from calling a quit to a fraud, instead, all these years PwC never announced these issues to the public-Maybe PwC just missed it, or has been aware of these issues to a certain extent but never considered it significant enough for an opinion other than an unqualified one.
Anyway, PwC is in a big dilemma now: it either has to justify why these issues are not significant enough to show in auditor's report, or has to explain among themselves why they made mistakes. I have gone through this process and I can assure you that it is very very time consuming, never short of finger pointing between partners in PwC, and lots of unreasonable requests from PwC could drive NQ management crazy.
My estimate is no annual filing anytime soon. But it will be either a fully clean opinion or a clean one with restatement. NQ price will go back to 15-20 for sure, but it will be a long wait.
MW always claim everything fraudulent...but the fact is nothing found...
Sentiment: Strong Buy
$1M quarterly revenue with $80M-$90M market cap? This company is a toast. Consider buying HPJ instead: sure there is debt default risk but the company has been rolling out new product and signing up with new customers so the risk should be controllable. Besides, it has been generating $30M quarterly revenue with a market cap around $50M-$60M-a good discounted value at this time.
I am pretty sure investors who recently bought shares at $5.05 are not happy with the stock price performance. Top management bought only 17K shares at low $3 level-the action is rather a symbolic move than a strong show of confidence of its business growth.
And there is even an insider sell at $3.22-was this guy out of his mind???-I had rarely seen management folks in public companies acted in discord at that juncture.
We definitely need to see substantial insider buying to clear the doubt of investors!
Not sure how you did your formula: mkt cap for tesla + solar city is about $31 billion, hpj mkt cap is $50-$60 million. If you are right, hpj stock price will go up 600 times, which will be around $2,400-so the sky is the limit-:)
If just spreading rumors we can ignore it. But if you are making blatant false statements, it is just wrong: this person keeps saying there were insider buying and reports out in filings but there is no SEC filing so far for any recent insider purchase. No trust for any words from Dreamtrader99.
I don't see SEC filings(form 4) for HPJ insiders buying. Are you making this up or you know any insider information? Either case, this is bad for you. If you keep making this nonsense, you should be kicked out.
The debt financing makes the business very highly leveraged-the borrowings so far can only be done with personal guarantee per its 10Q and 10K filings: this means the banks don't feel comfortable with the net assets worth enough to pay back the loan in case of default. Given recent jitters of real estate markets in China, I am sure banks are looking at their loan portfolio very carefully and getting loan would become very difficult.
Make sure to keep this in mind in investing any debt ridden Chinese stocks. This risk may be greatly exaggerated but right now it looks like the only reasonable explanation of the price collapse from the company fundamentals.
Given the current gross margin status, there is no way to pay back short term loan. It has to be rolled over. If no bank is willing to lend to the company, it will go bankrupt. But HPJ borrowed to expand its Li-ion battery business and so far the revenue growth is impressive and there should be banks willing to deal with it.
So my conclusion is, yes, it is a very risky stock but it is not drowning. Recent stock price decline may be a good reflection of this risk.
There is no proof of significant shorting of the stock-what happened could also be an orderly sell-off by big investors and accelerated in the past two days with individual panic selling.
If it is simply a short attack, HPJ management needs to respond to it for protecting shareholders value. They can either buy stocks for their own accounts or comment on the short attack. The fact is, they have been silent. This is not good.
The volume in the past 3 trading days say it: big investors are still holding it tight. This is so far the only positive sign for this stock.
My bold prediction is the stock is bottomed out today at $3.8 today and will rebound significantly in the next few days. It may go to above $5 level.
With secondary offerings and issue of options/rsu compensations so far this year, the management had sent a message to investors the company was doing great. Yes, revenue is growing strongly but gross margin is so so, yet the bad thing is it reported a net loss-this has not been well-received by investors-few buying but more selling so far. The management needs to understand that good news can only drive stock prices to an extent that it may flash but won't keep.
Going forward, focus on the business and let financial results speak!
Sentiment: Strong Buy
Because it reported a net loss for the quarter. So far its gross margin has been low-this industry has been a low gross margin business. And its business is very much highly leveraged-the current ratio is less than 1 at the quarter end and the short-term loan and notes payable have to be rolled over and interest rate is a real risk. Putting aside all these risks, the growth of Li-ion battery business has been significant and the management has been working for a substantial growth business down the road.