The Truthseeker.com would like to give a special thanks to internationally renown Francois Goelo (Alias on SI) and a SSB (Short Selling Basher) who tipped off the investment community that they should short sell XING on the www.Siliconinvestor.com message board "OUR NEW INDEX / FROM STOCKWATCHER'S". Some may call him an avid critic of short sellers in general however The Truthseeker has determined he is a true cyber sleuth and deserves all the credit for bringing XING to our attention.
To: StkProfits (22633 )
From: Francois Goelo Wednesday, DEC 29 1999 9:57AM ET
Reply # of 22703
"ST, XING looks like a great short NOW! Qiao Xing far off making CDMA phones in China..."
Message 12405524
Thursday, 30-Dec-1999 22:50:29 EST
Only the Truth
TheTruthseeker.com initiates coverage on Qiao Xing Universal Telephone
Released
TheTruthseeker.com initiates coverage 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.
TheTruthseeker has additionally uncovered a widely practiced form of market manipulation in stocks that fall under the control of day traders. These sham trades are prearranged trader-to-trader transactions, executed over any of the ECN's used to match buyers and sellers. Under the current Lax Rules formed by the NASD, day traders can be sitting next to each other, or across the country, or at any of a number of Day Trading firms, and collude to buy and sell shares of a stock at increasing price levels, often in pre- or post- market sessions (when the market is closed) without any risk whatsoever and still give the illusion of a rising market. This activity continues until it attracts actual unsuspecting and naive investors into the after-hours trading, under the false impression that the trading is real when in fact the trading is fraudulent and the stock actually had no after hours interest.
The Truthseeker will issue an entire report in an upcoming issue of the TruthSeeker Report about this practice, and the harm it can cause to unsuspecting investors, who do not know that the market they are trading into is rigged.
The Truthseeker.com would like to give a special thanks to internationally renown Francois Goelo (Alias on SI) and a SSB (Short Selling Basher) who tipped off the investment community that they should short sell XING on the www.Siliconinvestor.com message board "OUR NEW INDEX / FROM STOCKWATCHER'S". Some may call him an avid critic of short sellers in general however The Truthseeker has determined he is a true cyber sleuth and deserves all the credit for bringing XING to our attention.
To: StkProfits (22633 )
From: Francois Goelo Wednesday, DEC 29 1999 9:57AM ET
Reply # of 22703
"ST, XING looks like a great short NOW! Qiao Xing far off making CDMA phones in China..."
Message 12405524
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