The Strange Case Of China Fire- CFSG

Discussion in 'Stocks' started by stonedinvestor, Mar 12, 2008.

  1. Mark Cuban took down a name I follow. I have no idea who's right. The company fought back with a share repurchase today. I don't have time evebn to read this now- let's put this in the ET system for easy reference, it could turn into an interesting trade at some point. here's the bear case>

    China Fire & Security Group Inc.

    Huiwen Liu is part owner of a natural food store in the Vancouver suburbs. The business has only a few employees and is sandwiched between a sex shop and a clinic for drug addicts.

    According to Securities and Exchange Commission filings, Liu also is sole shareholder of an offshore investment company that got 10.1 percent of China Fire & Security Group Inc. (Nasdaq: CFSG) when it went public through a reverse merger in 2006.

    Natural food store in Richmond BCThat offshore company, Worldtime Investment Advisors Ltd., notified the SEC on Dec. 4 that it planned to sell 600,000 of its 2.58 million China Fire shares, for estimated proceeds of $9.6 million.

    The business address listed for Liu in Worldtime’s initial disclosure form corresponded to her food store. The unlikely scenario of a shop owner in Canada holding more than $30 million of stock in a little-known Chinese manufacturer, through an investment company in the British Virgin Islands, was just one of the reasons that Sharesleuth decided to take a closer look. The quintupling of China Fire & Security’s share price in the 12 months following the reverse merger also got our attention. So did the company’s murky ownership and the mounting casualties among other “hot” Chinese stocks that have gained listings on U.S. exchanges through reverse mergers.

    Sharesleuth’s investigation turned up questions about transparency and disclosure at China Fire, which has headquarters in Beijing and makes fire detection and protection systems for steel mills, oil refineries and other industrial customers. For starters, we found that Huiwen Liu is the sister-in-law of China Fire’s chief executive officer, Bin “Brian’’ Lin – a fact not mentioned in any SEC filing.

    Sharesleuth also found that China Fire’s merger partner, UniPro Financial Services Inc., was one of three shells packaged by the same group of American financiers and middlemen, some of whom have previously been connected to stock manipulation schemes. Given that information, investors thinking about buying shares of China Fire might want to seek more information on the true identity of its major shareholders.

    Lin told Sharesleuth that his sister-in-law was simply a nominee for other owners who live in China and didn’t want to register their names. But SEC filings don’t reflect that. They state clearly that Liu is the beneficial owner of the shares, via Worldtime, and declare that Liu knows of no one else with the right to proceeds from their sale.

    Three more British Virgin Islands entities that got blocks of stock when China Fire merged into UniPro in October 2006 have reported plans to sell 1.5 million shares. They projected their proceeds at $19.8 million. China Fire’s SEC filings have not identified the people behind those entities, or explained how they originally acquired their stakes, each of which fell below the 5 percent threshold that triggers more detailed disclosure.

    Based on China Fire’s account of the reverse merger deal, those shareholders would have been Lin’s fellow owners of the fire-protection business. Lin said he helped arrange the stock sales at the suggestion of China Fire’s investment bankers, who wanted to get more shares into public circulation so that institutional buyers could take positions in the company. That may be true. But the effect was that certain unidentified parties appear to have sold tens of millions of dollars in stock at the same time that China Fire’s executives were issuing consistently positive statements about the company’s prospects.

    Lin said no one associated with China Fire knowingly violated any SEC rules or engaged in any impropriety. He said that he had not received any money from the share sales, nor had China Fire’s chairman, Gangjin Li, or members of their families. He added that the money from Worldtime’s stock sales were still in that company’s bank account.

    Lin said China Fire’s lawyers told the company it did not have to disclose Huiwen Liu’s relationship in its filings because she was not an immediate blood relative, such as a father, mother or child. However, the attorney who represented China Fire in the reverse merger deal told Sharesleuth that he gave no such advice.

    China Fire’s stock rose from $3.25 a share the day of the reverse merger to a high of $18.10 on Nov. 1, 2007. At its peak, the company had a market value of nearly $500 million. The company’s stock closed at $8.76 a share, off $1.56, on Monday.

    Sharesleuth also discovered that the sole American on China Fire’s board of directors, Gene Michael Bennett, does not have the law degree that he claimed. And contrary to what China Fire said in its press release announcing his appointment, he is not a Certified Public Accountant and has not been licensed as one in the United States for many years. Bennett heads China Fire’s audit committee, which is responsible for overseeing financial reporting, internal controls and transactions between the company and its officers, directors and affiliates.

    Sharesleuth turned up the American reverse-merger network in the course of another investigation, the results of which we will publish in the coming months. We decided to post this story first because at least two brokerages have issued buy recommendations on China Fire’s stock and we think that anyone considering an investment in the company might benefit from the additional information.

    Disclosure: Mark Cuban, the majority member of Sharesleuth.com LLC, has a short position in the shares of China Fire. Chris Carey, editor of Sharesleuth.com, does not invest in individual stocks and has no position in China Fire.
     
  2. I bought that company yesterday at 5.05. Got out today at 5.68 right before the drop to the 5.20s. I ignored the stock the rest of the day figuring i did the right thing. Stock was trading 6 dollars in the AH and i wondered if Cuban was just full of hot air. I knew CFSG would respond today which is why i bought...figured i would at least catch the pop. But now im thinking that Cuban is just a billionaire basher now without any real info on the company. The whole scandel with who owned the stocks was basically just people holding the stocks for the voting power and had no economic interest as the company said. Im wondering if i should've got out because this stock may just go to 15 soon.
     
  3. YOU KNOW WHAT GOD BLESS YOU FOR BEING IN THE GAME AND SHAME AND DISRESPECT TO THE REST OF ELITE TRADER! I'VE WORKED MY DAMN ASS OFF THIS WEEK FOR YOU GUYS TOSSING OUT CALL AFTER CALL I'M DOING ALL THE HEAVY LIFTING NO ONE IS RESEARCHING EVERYONE IS JUST HOLDING THEIR BALLS. DAMN IT!

    I just checked my boston account holy cow there is a grand mistress of finance!

    CHINA FIRE & SEC GRP(NasdaqCM: CFSG)
    on 03/13/08
    Last Trade: 7.565
    Trade Time: 4:00PM ET
    Change: 1.605 (26.93%)
    Prev Close: 5.96
    Open: 6.10
    Bid: 7.30 x 100
    Ask: 7.75 x 400

    Nearly 30% trade and nare a nice job or thank you.
    Leapfrog same thing- worked my ass off on that one. No love. Well, I'll just have to let it go and chalk it up to market conditions but all my crew seem to have blown up.... still I toil, with this bad mattress and screwed up chair who's back falls off each day. I'm in such pain but STILL I'm there for you each and every whether you like it or not. Let's Drink!
    ~ stoney OUT
     
  4. Stoney, you can throw 200 tickers out there and a few will hit.


    If I bet on every ticker you threw out, I would be in the poor house. What happened to ZVUE at $3 all in. Its .72 man

    You remind me of a stock broker in the good all days flipping in and out of stocks to rake in $200 round trip commission orders.


    Smoke a bowl man:D
     
  5. Pump you know I love you but F you in the worst way. I don't " throw out " tickers man I thoroughally vett & frett over each one- I only use my stocks I don't follow the general market I don't scalp or scan for volume and market leaders or any of that lazy shit; I do it the old fashioned way and that's why when I'm right the returns are massive. and by the way I'm in over my head in every damn one and all you dois kill me for ZVUE which I might add TRIPLED UNFDER MY WATCH BEFORE I RODE IT ALL THE WAY INTO THE GRAVE And took a big hit. you have me riled up man! LISTEN I DO THIS WHEN THE DAMN MARKET IS CRASHING EVERY DAY I DIDN'T FRONT LOAD THIS RALLY I HAD YOU ALL IN POSITION ON MONDAY WIOYH NMY ABBREVIATED READER I DIDN'T HAVE TO DO THAT...ALL THE NAMES THAT WORKED FOR ME THIS WEEK (I HAD A GREAT WEEK) WORKED FOR YOU ALL- AND YOU ALLHAD A GREAT WEEK TOO. If you listened. I have to calm down and yes I am going to smoke right now... 9:20 am

    HOW DARE YOU ISINUATE I THROW OUT NAMES!! THESE ARE MY GODAMN BABIES THAT'S WHY I MAKE SO MANY ROUND TRIPS WHILE YOU SCALPERS FEED OFF MY DROPPINGS AND MAKE OUT BETTER!!!!

    ARGGGGGGG1 I just spat up me damn coffeE and my machine is beeping FOLKS THAT'S RIGHT I HAVE AN AT HOME BLOOD PRESSURE MACHINE WRAPPED IN A BOX UNDER MY BED THE DR MADE ME GET IT FOR SOME REASON....AND EVEN THOUGH I DON'T USE IT RIGHT NOW I CAN FEEL IT BEEPING AWAY...

    OH PUMP. Step up I expect more form you friend.
    Cuban's diss didn't even make the main press I hunted it down because I know this company inside and out. I gave all the info to you all, I didn't have to do that. My success ratio on this site beguiles the mind.... I had one bad run with my new year picks and you know what?- a bear market and recession is not going to treat a basket of stocks well, I don't think it's just me but yes I took a slew of hit 24% losses and I just keep buying more stuff as I always have... in down markets i always break even have done so for many many years I do that by not losing my willingness to buy. I'm there for every blip and rally in a bear market and you have to be. If that brings huge roll calls of stocks my way so be it, I'm the one who has to do all the paperwork at tax time (around the corner) what you care if i give you 200 winners or two? The fact is they are winners.

    Now buy these damn 3 stocks NOW and stop watching all my stuff elevate. These three stocks will all double in six months. Save this post.

    - MELI

    - CHINA

    - MRVL

    I am buying each of these at the hedge fund today in size. ~ stoney
     
  6. Sorry Stoney, you're the man...Way too much shit going on...

    Look at that BSC action!!!!!!!!!