Tuesday, February 1, 2011

Short Idea: Auto China International (AUTC)

A group called The Forensic Factor has put out a research report on a company called Auto China International (AUTC). The report raises a number of red flags, including:

  • questionable use of gain-on-sale accounting
  • "$450 million discrepancy between operating cash flow and net income"
  • a dilutive earnout for management that has "potentially incentivized management to use logic-defying accounting to drive specious revenues and earnings"
  • "misunderstood market capitalization based upon future earnout shares that do NOT appear to be included in sellside models"
  • "A CFO that was previously the Director of Research at a firm that turned out to be one of the largest ponzi schemes in U.S. History"
Stock was down close to 20 percent today. Management put out a statement saying that it "refutes negative statements published earlier today" but did not give any sort of substantive response.


CP said...

From Zero Hedge:

"Jim Chanos says China is a shortseller's dream and that there's not one company he's looked at that passes the accounting sniff test."

Taylor Conant said...

Hasn't this ship already sailed? Why not find another fraud that hasn't been sniffed out yet and squat over it?

CP said...

If what the report says is true, the company is a zero. So, there is still 100 percent to go.