TheTruthseeker.com Announces Investment Opinion on Qiao Xing Universal Telephone
NEWTON, N.J.--(BUSINESS WIRE)--Dec. 31, 1999--
TheTruthseeker.com Initiates Investment Opinion on Qiao Xing
Universal Telephone, Inc, With an Immediate Sell Recommendation
TheTruthseeker.com initiates investment opinion on Qiao Xing Universal Telephone,Inc., (NASDAQ : XING), with an immediate SELL / SELL SHORT RECOMMENDATION at 31 and an intermediate term price target of 3 dollars over the next 3-12 months.
Summary:
The company has drawn attention to itself with a press release which caused unwarranted, frantic, and possibly manipulated day-trading in this stock over the last few days. The company claims that they are on the verge of manufacturing CDMA cell phones while withholding the fact that they do not and have never manufactured any type of cellular or wireless telephone handsets. In addition according to the Chairman of XING, Riu Lin Wu, the Company has no ability to manufacture wireless phones of any nature currently.
Background:
XING is a small, unremarkable manufacturer of standard (non-wireless) telephone handsets located in Guangdong, China, owned by a British Virgin Island-based holding company. Sales for the 3rd quarter 1999 were $10.5M ($40 M annualized) and earnings were flat at $820K, (.09 per share). Sales for the 9 month period actually declined by about 7% year over year. According to all SEC filings, the company has never been involved in wireless phone manufacturing of any kind, not even phones using the GSM standard currently used in China.
Trading at 5 or lower on tiny volume for most of 1999, XING was an unnoticed penny stock until the first wave of "China WTO" mania hit the market following the much publicized US/China trade agreement in November. XING spiked as high as 28 on successive days with unprecedented volume, before falling back to 7 dollars per share. Daytraders were indiscriminately buying up any stock even remotely connected with China. On each of these issues, investors caught holding the bag were stuck when they all crashed, as their absurd valuations could not be sustained for more than a few days.
Current Events:
On Tuesday, December 28th, XING produced a press release which deceptively announced: "Potential Entry Into China's Untapped CDMA Cellphone Market". This release caused a huge spike in XING's price and volume, in which it traded as high as 70 dollars per share before falling back into the teens.
XING's PR is misleading at the least. The timing of this PR coincides with a huge run-up in shares of Qualcomm (QCOM), which holds many of the patent rights for CDMA technology (a highly popular cellphone technology standard).
But consider the following:
-- While it shouts the heavily hyped "CDMA" buzzword in its PR, XING
fails to disclose it doesn't manufacture any wireless type phones
and never has, not even the GSM standard phones currently used in
China
-- While the Chinese Ministry of Information announced in October it
would authorize three to five companies in China to make CDMA
cell phones, XING has no special standing, and according to a
Reuters source in the Chinese Ministry of Information, XING has
filed no such application with any entity at all.
-- According to the same official, any such approval could not
possibly proceed until China wins admission to the WTO (World
Trade Organization), such admission being months to years away
from resolution, if ever.
-- China would not be obliged to honor its trade agreement with the
US unless Congress extended permanent Normal Trade Rights to
China. Such action by Congress is uncertain at best.
The truth is that XING's chances are slim to none of ever producing such phones, and years away at best. XING's claim that the provincial government of Guangdong is "reviewing its application," is deceptive. There is no particular significance to this "review," no guarantee of a favorable outcome, and provincial review is only a preliminary step to state approval required prior to any such manufacturing. From those who know how business is actually conducted in China, it is highly bureaucratic, slow, and rife with corruption. Any company that is not state owned operates at a huge disadvantage when competing for business. It is very unlikely that XING would ever be granted manufacturing rights that would place it in a favorable competitive position to state-owned enterprises. Additionally, China currently runs on a GSM standard for cell phones, and CDMA phones would not be usable prior to deployment of an entirely new wireless infrastructure, an immense task considering the commercial environment in China.
Buyer Beware!!
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