NUIN — Nutrastar Intl.

[AviaLaf]

Jae wrote about NUIN awhile ago in his newsletter as a potential value play.

It's a Chinese [scary] supplement company with reported net cash position of $125.46 million, and a market cap of $5.3 million. Jae concluded that the market cap valuation could be due to speculation of fraud.

Since Jae's email, I've been watching the stock, curious to see where it would go. Today, the first market day after the company filed an 8-k with the SEC, the stock plunged from a $10 million market cap to today's $5.3. Because I'm not super versed in legalese, I'm having trouble understanding why the statement could result in such a plunge. Can any readers help me understand?

An 8-k, filed on 11/20 seems to be saying the following:
The company couldn't access its liquid assets because the CEO wouldn't allow access.
In order to pay off debt, the company borrowed $180k cash from the CFO and Richard Fearon in exchange for stock.
The board intends to replace the CEO.
The company hasn't yet released their Q3 10-Q.
What am I not reading between the lines? I'm missing something big here; but why did these events trigger a sell-off?

[aotvfdqd81]

Most Chinese stocks on London's unregulated AIM are on ultra low P/E's now because nobody believes the numbers anymore.

Plus alot of the time the cash isn't real and/or shareholders don't actually own the assets. Not familiar with the company, but do investors believe the cash is real?

Why list on a foreign exchange anyway?

[atasofuzev]

Posts: 134
I don't know the company, but based on those bullet points the cash is either not real or shareholders don't own it or the CEO is a crook. Or more than one of those. And those should be enough to drop the stock a lot. If they really have the cash then why would they need to dilute shareholders by selling more.

[ansretikGox]

Got it. That makes a lot of sense.

[Angeladom]

Posts: 2,810
I had to take that post down because the author wanted a link to this affiliate blog which I didn't approve.

But either way, the article was about how to analyze chinese stocks.

Personally, I don't like them still. Throwing the baby out with the bath water? Probably, but Chinese companies still have a LOOOOOOOOONG way to go in terms of ethics and operating a business properly.

Easier to move on and focus on something else.