Hi magic. It appears as a complex affair but it in terms of the strategy and intentions it is rather simple. The current CEO who is a major shareholder of a private holding company and at least partially owns host of private companies began to buy the shares of OINK which was primarily a hog production company and thereafter became its CEO and injected more capital into the company by buying issued shares at $2.40. He then proceeded to change the name and direction of the company by renaming it ABAC which combines the names of the old hog company and his private holding company; and by focusing on acquiring high growth companies as subsidiaries of ABAC and turning the firm into a multi-product holding company. He is subsequently buying the private companies in which he has an interest with cash and new ABAC share issues with the objective of turning all these private companies into subsidiaries of the U.S. listed ABAC. Although he paid $2,40 for his shares, now the lower the price of ABAC shares the more shares have to be issued to buy his other private companies. Accordingly, by holding back the ABAC price, he is buying his other companies with cheap ABAC shares which results in overvaluation of those private companies which he claims are high growth and profitable companies. The lower the price of ABAC the more of its shares have to be issued to buy those private companies. So far is straightforward and explains the market and price manipulation. But the difficulty is the valuation of these private companies since there is no history or record of their performance or an opinion of an independent auditor. If you go by his claims, ABAC would be transformed into a much larger high growth and more profitable company with much higher price than $2.40 he paid to take control. But I never trust the claims made by any CEO unless it is independently corroborated and supported by facts and data.
I agree southerndog. CC will provide much better insight. If we don't see significant improvement in the financials and improved guidance, there is a high probability of going dark or a merger/buyout at low prices.
The CEO buying another one of his companies with cheap ABAC shares. The lower the price of ABAC the more shares have to be issued to buy another one of his companies as a subsidiary of ABAC and the higher will be the valuation of those companies. That is why the price is held back since he can issue ABAC shares at say, $1.80, to complete the acquisition while he has paid $2.40 for them when taking a stake in ABAC. Nice way of enriching himself and at the same time converting his private companies of dubious value into the subsidiary of a listed public company. I say dubious because there is no independent valuation of these private companies and no history of their performance though he claims they are all profitable and growing with the expectation of higher profits. I think this game will continue until he is done with the conversion which at the current pace should be accomplished by the end of the year.
Nearly all the negative factors which could affect the price are behind us and are already reflected in the price but the potential forthcoming events are all positive. The net income is supposed to be positive for the rest of the year and the CEO to gain some credibility may come forward with a higher dividend and/or a stock repurchase program.
Shares bought below $2.14 are around 100,000 and I hold 16,000 of them, but so far several hundred thousand shares have been traded below $2.30s. So no one can be selling and profiting from the sale at these price range since they had to pay higher than $2.14 for their shares. Therefore the seller , if there is one, is taking a loss but given the number of shares sold, the seller cannot be just a retail seller and must be either an institution or an insider. But there is no trace of either one of them selling and no SEC filing. The short volume does not support a major short activity responsible for the price action. My conclusion is that someone is trying to pin the price but there is a buyer or buyers who are taking advantage of it and accumulating. The main question is why they are trying to hold back the price? I think it has to do with a second buyout offer by the CEO, if his first offer was just preliminary, or by an outsider.
All these shares are being sold at a loss so if there is a seller he is forced to liquidate. Given the volume of shares being sold so far, the seller, if there is one, has to be an insider or institutional holder.
So long as there are new issues the price will be held back in order to show a high premium for new issue ($2.40 was the last new issue price when the market price was at $2.00) and more importantly, the CEO is converting his own private companies into a subsidiary of ABAC and this last acquisition was accomplished through issuing of ABAC shares. The lower the market price the greater will be the number of shares issued for these acquisitions. So he is buying his own private companies as subsidiaries at a low ABAC prices requiring more shares issued while he has paid $2.40 to acquire the same shares. These lower valuations of ABAC results in higher valuation of the acquired companies in which he has an interest.
95% of Wuhan Optical Orange Technology in exchange for company shares. This company also will have positive earnings this year. It is now becoming more certain that the CEO is moving in the direction of creating a making past OINK into a multi-subsidiary and multi-product company by acquiring purported high growth and profitable companies as subsidiaries. Moreover, that the CEO and his associates fully or partially own these companies and are converting them into a subsidiary of a NASDAQ listed company--private companies converted into a subsidiary of listed public company. My past posts had speculated about this process and continued expansion through capital injections into ABAC and further acquisitions by using this capital and/or issuing company shares. Accordingly I expect more capital injection and share issue to the CEO and/or his associates and more acquisitions of private companies in which they have an interest. All these subsidiaries are supposedly profitable but lack financial history and record of performance which renders valuation or approximate valuation and impossible task. The CEO claims that this purchase was at a bargain but we need to see some data other than reported expected net revenue to determine the expected future value of ABAC. I have no problem with the concept, strategy, and the process which may significantly increase the price of ABAC, but all of this rests strictly on accepting the claims made by the CEO rather than reliable substantive data and information.
If there is no improvement in the financials and the price lingers at this level by the time of delisting, then a reverse split will have only a temporary effect as it will make the stock a very good short candidate. Then the shareholders will lose even more money. I think by the time of delisting if the financials continue to deteriorate the company management would be better off to sell the company at a meager price or go dark and allow delisting. Personally I think there is a strong possibility for a merger/buyout which is the main reason I initially purchased CHOP.