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.