Independent Audit Vindicates Silvercorp

[Parsad]

KPMG's forensic unit report has stated that there is nothing fraudulent about Silvercorp's revenues or business.  I'm sure the short-sellers meant no harm.  They were only trying to help investors with the best of unselfish intentions, and certainly no desire to profit from false rumours or fraudulent accusations.  Cheers!

 

http://www.theglobeandmail.com/globe-investor/independent-audit-vindicates-silvercorp/article2211260/

[Guest Hester]

 

Only short sellers have to deal with being accused of creating false rumors and creating all out fraud when they get an investment analysis wrong, which they haven't definitively been proven wrong yet (although it's looking worse).

 

And as always those who defended the Sino Forest criminals and personally attacked (verbally obviously) Carson Block, and were dead wrong on the fate of the company, were just a few honest guys seeking the truth, no harm no foul right?

[Parsad]

 

Only short sellers have to deal with being accused of creating false rumors and creating all out fraud when they get an investment analysis wrong, which they haven't definitively been proven wrong yet (although it's looking worse).

 

And as always those who defended the Sino Forest criminals and personally attacked (verbally obviously) Carson Block, and were dead wrong on the fate of the company, were just a few honest guys seeking the truth, no harm no foul right?

 

It's the difference between putting an innocent man to death or giving him a life sentence.  Some people think there is no difference...unfortunately there is!  Cheers!

[cwericb]

"And as always those who defended the Sino Forest criminals and personally attacked (verbally obviously) Carson Block, and were dead wrong on the fate of the company, were just a few honest guys seeking the truth, no harm no foul right? "

 

Wow that's pretty strong language and a bit premature for something that has yet to be proven. Would you like to name names - just questioning your tolerance for a potential libel suit when you paint the company with such a broad brush?

 

TRE just made their latest interest payment the other day. Does that not strike you curious for a company that is in your friend Block's words, a "complete Ponzi scheme"?

[ragnarisapirate]

 

Only short sellers have to deal with being accused of creating false rumors and creating all out fraud when they get an investment analysis wrong, which they haven't definitively been proven wrong yet (although it's looking worse).

 

 

Well put.

 

I can't imagine why somebody would go to such great efforts to try to make the type of tangle conspiracy that short sellers are often accused of taking part in... there are too many other ways to ethically make money.

 

And this is coming from somebody who has never shorted. Really, if I were convinced I was right on a target of these "bear raids" and such, I would welcome the short sellers, and would even be willing to lend them my shares, so that I could buy more at a lower price. Does anybody that wasn't emotionally involved in the Fairfax case even remember what happened? I don't think so; Fairfax has a great reputation.

 

In light of that, maybe we should be worried that these short sellers, who are looking as if they will be proven wrong, were actually employed by the evil longs, so that they could be more at a lower price.

 

Oh, wait a minute. That would be generally thought of as absurd... Just saying.

[oec2000]

TRE just made their latest interest payment the other day. Does that not strike you curious for a company that is in your friend Block's words, a "complete Ponzi scheme"?

 

If you understand how ponzi schemes work, you will not think this curious at all. Ponzi schemes work BECAUSE the operators do pay interest - at very attractive rates usually!

[Parsad]

And this is coming from somebody who has never shorted. Really, if I were convinced I was right on a target of these "bear raids" and such, I would welcome the short sellers, and would even be willing to lend them my shares, so that I could buy more at a lower price. Does anybody that wasn't emotionally involved in the Fairfax case even remember what happened? I don't think so; Fairfax has a great reputation.

 

That's akin to saying that if the victim of a hit and run is ok and walking after a few years, there was nothing wrong with what happened.  I can't believe that people who would agree with my statement above, feel that the same action in terms of short-selling is morally ok.  I have no problem with the individual short-seller who takes a position.  My problem is with collusion.  And while that happens with longs even more than with shorts, it by no means makes it right.  Cheers!   

[Guest Hester]

"And as always those who defended the Sino Forest criminals and personally attacked (verbally obviously) Carson Block, and were dead wrong on the fate of the company, were just a few honest guys seeking the truth, no harm no foul right? "

 

Wow that's pretty strong language and a bit premature for something that has yet to be proven. Would you like to name names - just questioning your tolerance for a potential libel suit when you paint the company with such a broad brush?

 

TRE just made their latest interest payment the other day. Does that not strike you curious for a company that is in your friend Block's words, a "complete Ponzi scheme"?

 

A libel suit? Are you kidding me? For calling a company a fraud after the regulators halt shares and force management out?

 

Jeezus do you really want to double down on another round of this Sino Forest bs?

 

Cwericb, whoever you are, I have news for you.

 

You got fooled.

 

Duped.

 

It's over.

 

Such fierce loyalty to those who just defrauded you is amusing, but threatening me with a lawsuit is enraging. You should be suing the top management who defrauded you.

 

My advice, try to learn something from the experience and move on, but don't threaten people with libel suits because they call a spade a spade.

 

 

[Guest Hester]

That's akin to saying that if the victim of a hit and run is ok and walking after a few years, there was nothing wrong with what happened. 

 

That's a false analogy, because a hit and run sees the victim severely injured for a period of time. A negative writeup on a company, although it distracts management, doesn't affect the core business. Alfred Little's blog ramblings don't make it harder or more difficult to mine silver. Unless there is some silver fairy that I don't know about working for the shorts and disrupting mining procedures (I wouldn't put it past the Sith Lord).

 

Access to capital is a privilege not a right. Capital can freeze with or without shorts, just due to a loss of confidence. Silvercorp will get that privilege back if and when the shorts are proven wrong (they are possibly most of the way there) and/or the market restores confidence in them, just like the Fairfax story.

 

[Parsad]

That's a false analogy, because a hit and run sees the victim severely injured for a period of time. A negative writeup on a company, although it distracts management, doesn't affect the core business. Alfred Little's blog ramblings don't make it harder or more difficult to mine silver. Unless there is some silver fairy that I don't know about working for the shorts and disrupting mining procedures (I wouldn't put it past the Sith Lord).

 

Yes, because most mining companies don't access the public markets for financing to continue exploration and development...is that your thesis!  If somebody yells fire in a theatre, do you think any interested moviegoer is going to stick around?  Give me a break!

 

Access to capital is a privilege not a right. Capital can freeze with or without shorts, just due to a loss of confidence. Silvercorp will get that privilege back if and when the shorts are proven wrong (they are possibly most of the way there) and/or the market restores confidence in them, just like the Fairfax story.

 

Yes, that's right...if and when the shorts are proven wrong!  Do you think Prem sold $300M in Fairfax stock under book to Cundill, Markel and Longleaf because he wanted to?  He needed the money to maintain Fairfax's credit rating after the shorts yelled "fire".  If Prem had waited for the shorts to be proven wrong, Fairfax would not be around today.  Cheers! 

 

[oec2000]

I'm sure the short-sellers meant no harm.  They were only trying to help investors with the best of unselfish intentions, and certainly no desire to profit from false rumours or fraudulent accusations.  Cheers!

 

 

All investors (including Buffett and Watsa and I presume all of us here) invest with selfish intentions of making money - it is simply unfair to imply that only short sellers have selfish intentions. No one is claiming that shorts are altruists out to help the world.

 

But we cannot deny that the actions of both longs and shorts can contribute to the greater good (e.g. when the longs provide capital to good companies and when the shorts expose dishonest management).

 

I understand and share your distaste for unscrupulous characters who short, distort and collude. However, there is a tendency for the negative "rush to judgement" of shorts who go public with their positions. Unless there is evidence of wrongdoing, shouldn't we practise the principle of "innocent until proven guilty?"

 

Where is the evidence that Carson Block deliberately singled out healthy companies for attack and spread false rumours? Why do people think that shorts would deliberately choose healthy companies to attack? No matter how unethical they are, it doesn't make sense to choose a healthy company to short over an unhealthy one. The simpler explanation - that shorts, like longs, occasionally make mistakes in their analyses - seems more plausible to me.

 

That's akin to saying that if the victim of a hit and run is ok and walking after a few years, there was nothing wrong with what happened. 

 

That's a false analogy, because a hit and run sees the victim severely injured for a period of time. A negative writeup on a company, although it distracts management, doesn't affect the core business. Alfred Little's blog ramblings don't make it harder or more difficult to mine silver. Unless there is some silver fairy that I don't know about working for the shorts and disrupting mining procedures (I wouldn't put it past the Sith Lord).

 

Access to capital is a privilege not a right. Capital can freeze with or without shorts, just due to a loss of confidence. Silvercorp will get that privilege back if and when the shorts are proven wrong (they are possibly most of the way there) and/or the market restores confidence in them, just like the Fairfax story.

 

 

Hester, don't you think we should make a distinction between "good" and "bad" shorts? To the extent that "bad" shorts drive down a company's stock with false rumours and coordinated attacks resulting in a highly dilutive fundraising (as happened with FFH), there is some permanent damage done. The bad shorts have the privilege to trade in markets but surely that doesn't give them the right to use illegal tactics.

 

I think the problem with this debate is that we have one group who want to demonise all high-profile shorts and another group that want to defend all shorts. Why not just accept there are some "bad" shorts (whom we should all condemn) and some "good" shorts (whom we should all support for their contrary views)?

[Guest Hester]

That's a false analogy, because a hit and run sees the victim severely injured for a period of time. A negative writeup on a company, although it distracts management, doesn't affect the core business. Alfred Little's blog ramblings don't make it harder or more difficult to mine silver. Unless there is some silver fairy that I don't know about working for the shorts and disrupting mining procedures (I wouldn't put it past the Sith Lord).

 

Yes, because most mining companies don't access the public markets for financing to continue exploration and development...is that your thesis!  If somebody yells fire in a theatre, do you think any interested moviegoer is going to stick around?  Give me a break!

 

Access to capital is a privilege not a right. Capital can freeze with or without shorts, just due to a loss of confidence. Silvercorp will get that privilege back if and when the shorts are proven wrong (they are possibly most of the way there) and/or the market restores confidence in them, just like the Fairfax story.

 

Yes, that's right...if and when the shorts are proven wrong!  Do you think Prem sold $300M in Fairfax stock under book to Cundill, Markel and Longleaf because he wanted to?  He needed the money to maintain Fairfax's credit rating after the shorts yelled "fire".  If Prem had waited for the shorts to be proven wrong, Fairfax would not be around today.  Cheers!

 

The problem is less the shorts and more with business models that rely on access to capital markets to survive. Again, there are other forces, besides shorts, that can cripple a company that needs access to financing to survive. You might as well blame panicky investors, mister market, or animal spirits. Shorts get the flack because they are tangible and people percieve them as evil or shady.

 

Of course most financial firms need financing to survive, which is why they must build up long term and solid financing arrangements, that isn't subject to the whims of Mr. Market. A silver company, which is the subject at hand, should easily be able to survive a few months without access to capital. Not being able to grow your business (I.E. exploration) is par for the course if you are relying on Mr. Market to expand. A small silver company having to put expansion on hold for a quarter or two is a small price for society to pay in exchange for all the giant frauds the shorts have taken down in the last year.

 

Would Sino Forest or China Media Express still be selling new securities to investors had Block and others not shorted and shared their research in a big way? We all know the answer to that.

[Guest Hester]

Hester, don't you think we should make a distinction between "good" and "bad" shorts? To the extent that "bad" shorts drive down a company's stock with false rumours and coordinated attacks resulting in a highly dilutive fundraising (as happened with FFH), there is some permanent damage done. The bad shorts have the privilege to trade in markets but surely that doesn't give them the right to use illegal tactics.

 

I think the problem with this debate is that we have one group who want to demonise all high-profile shorts and another group that want to defend all shorts. Why not just accept there are some "bad" shorts (whom we should all condemn) and some "good" shorts (whom we should all support for their contrary views)?

 

The problem is "bad" shorts are rarer than people think. There are some, the rumors surrounding BAC that they were getting taken under, whoever created that should be prosecuted.

 

But the fantasy that there are all these shorts that frequently get together to take down good companies and profit is just a fantasy. Short selling is very difficult, and short selling manipulation is near impossible to get away with. People hate shorts, members of Congress have called shorts unamerican, the SEC is willing to ban short selling for a period of time, longs hate shorts with a passion obviously.

 

Carson Block gets death threats, how many stock pumpers have ever gotten a death threat? Have you read seeking alpha short articles? Almost everyone has a comment from someone saying they are reporting them for the SEC. One Kerrisdale Capital short article on a Chinese RTO probably had 30 or 40 people saying they are going to sue them or report them to the SEC.

 

Furthermore getting the borrow on a stock is hard and costly, and if others pile in it gets costlier. It's much easier to pump some penny stock. I'm not saying short sellers are reservoirs of virtue, not at all. It's just that the way the system and psychology works, the manipulators are overwhelmingly on the long side because it's easier.

 

Think about it, Einhorn was scrutinized by the SEC for his allied capital short, Ackman for his MBIA short. Have they ever been scrutinized for a long presentation? If you're a manipulator, why short and face the scrutiny? Fly under the radar as a long. It's much easier.

 

That's not to say shorts can't just plain get an investment thesis wrong, but there is nothing illegal about being human.

 

But to answer your question, in my view I don't defend bad shorts, and I have trouble finding them (the illegal ones not the stupid ones, I can find plenty of stupid shorts).

[cwericb]

“A libel suit? Are you kidding me? For calling a company a fraud after the regulators halt shares and force management out?

 

Jeezus do you really want to double down on another round of this Sino Forest bs?

 

Cwericb, whoever you are, I have news for you.

 

You got fooled.

 

Duped.

 

It's over.

 

Such fierce loyalty to those who just defrauded you is amusing, but threatening me with a lawsuit is enraging. You should be suing the top management who defrauded you.

 

My advice, try to learn something from the experience and move on, but don't threaten people with libel suits because they call a spade a spade.”

 

Hester, Hester, Hester, calm down man. You seem to have trouble understanding the fact that libelling a company or their directors on a message board can have serious repercussions.  I'm not threatening to sue you or anyone else, no one is libelling me, I was simply suggesting that TRE might take a dim view of you calling them a bunch of crooks in a public forum before anything is proven. Would you like me to cite some examples of posters being sued?

 

Also, there is a big difference between a stock being halted and a stock being de-listed. As I said, you are being premature in saying the company is done, but I would hate to see your faith in Carson Block being shaken.

 

You have been very vocal in your opinions that TRE is dead and gone and you agree with Carson Block’s accusations of the company being “a complete Ponzie scheme”. Just how surprised would you be to see this stock trading again in the new year?

 

Once again, for the record. I fully expect that certain directors may have been involved in practices they should not have been. However, I think that this stock will be trading again once the dust settles.

 

 

“If you understand how ponzi schemes work, you will not think this curious at all. Ponzi schemes work BECAUSE the operators do pay interest - at very attractive rates usually!”

 

 

Oec2000. I am quite aware of how a Ponzi scheme works. But this stock is NOT trading. Therefore there is no advantage for TRE to pretend all is normal to gain new investors. Think about it.

 

Sino has been accused of being a Ponzi scheme and are presently being investigated for that. If they were a Ponzi scheme and the company was shortly going to be exposed as such, why would they pay anything at this point? In fact if they were going bankrupt, payments made at this point could be seen as preference payments and overturned under the Bankruptcy Act. PWC would be well aware of this and would likely prevent such payments from being made if they thought there was any risk of bankruptcy.

[oec2000]

Oec2000. I am quite aware of how a Ponzi scheme works. But this stock is NOT trading. Therefore there is no advantage for TRE to pretend all is normal to gain new investors. Think about it.

 

Sino has been accused of being a Ponzi scheme and are presently being investigated for that. If they were a Ponzi scheme and the company was shortly going to be exposed as such, why would they pay anything at this point? In fact if they were going bankrupt, payments made at this point could be seen as preference payments and overturned under the Bankruptcy Act. PWC would be well aware of this and would likely prevent such payments from being made if they thought there was any risk of bankruptcy.

 

Last time I checked, it did not appear that either current management (i.e. those who have not been suspended) or the auditors really knew what was going on in the company. Do you think they know whether the company is solvent?

[cwericb]

"Last time I checked, it did not appear that either current management (i.e. those who have not been suspended) or the auditors really knew what was going on in the company. Do you think they know whether the company is solvent?"

 

You may well be right in that, but one would think that after four and a half months into the audit that PWC would have some idea as to the solvency of the company. But that is not the point I was making.

 

What I said was that your assertion that the payment was part of a Ponzi scheme simply could not be correct by definition. The stock is not trading. Therefore, there is no gain to be made. In turn, the payment could not be part of a Ponzie scheme.

 

The payment may or may not be an indication of good news to come on TRE but it is certainly not bad news.

[Parsad]

Hester, don't you think we should make a distinction between "good" and "bad" shorts? To the extent that "bad" shorts drive down a company's stock with false rumours and coordinated attacks resulting in a highly dilutive fundraising (as happened with FFH), there is some permanent damage done. The bad shorts have the privilege to trade in markets but surely that doesn't give them the right to use illegal tactics.

 

I think the problem with this debate is that we have one group who want to demonise all high-profile shorts and another group that want to defend all shorts. Why not just accept there are some "bad" shorts (whom we should all condemn) and some "good" shorts (whom we should all support for their contrary views)?

 

Oec, I think that is better.  I'm not against short-sellers, just like I'm not entirely in favor of anyone who is long.  I'm against members of both groups if they are colluding to drive a company's price up or down...manipulating the stock...hurting shareholders of the corporation...or straddling the lines of what is ethical.  My comments were simply in reply to the fact that just because Overstock's business has done poorly, does not mean that the act of manipulating the stock did not occur.  Cheers!

[Guest Hester]

Hester, Hester, Hester, calm down man. You seem to have trouble understanding the fact that libelling a company or their directors on a message board can have serious repercussions.  I'm not threatening to sue you or anyone else, no one is libelling me, I was simply suggesting that TRE might take a dim view of you calling them a bunch of crooks in a public forum before anything is proven. Would you like me to cite some examples of posters being sued?

 

Also, there is a big difference between a stock being halted and a stock being de-listed. As I said, you are being premature in saying the company is done, but I would hate to see your faith in Carson Block being shaken.

 

You have been very vocal in your opinions that TRE is dead and gone and you agree with Carson Block’s accusations of the company being “a complete Ponzie scheme”. Just how surprised would you be to see this stock trading again in the new year?

 

Once again, for the record. I fully expect that certain directors may have been involved in practices they should not have been. However, I think that this stock will be trading again once the dust settles.

 

 

This is such a joke, really. I never said the company was a total ponzi scheme, and I've even said in the past that the bonds may have some value once this corpse is picked over. But the stock is definitely worthless (you were afterall, a shareholder not a bond holder). I have been proven right in my original suspicions of some fraud, and the response I get from Sino Forest bull-extrordinaire is: watch out, the people who defrauded me might sue you for libel because you called them criminals!!!

 

At least I've gained some respect for the people who were long CCME and wrote bullish reports, and apologized after the fraud was discovered and even went negative on the space. Apparently that doesn't come naturally for everyone.

 

 

 

p.s Enron stock still trades on the pinks, so yes, TRE will probably trade again but don't think you'll get your money back  ;).

[ragnarisapirate]

Hester, don't you think we should make a distinction between "good" and "bad" shorts? To the extent that "bad" shorts drive down a company's stock with false rumours and coordinated attacks resulting in a highly dilutive fundraising (as happened with FFH), there is some permanent damage done. The bad shorts have the privilege to trade in markets but surely that doesn't give them the right to use illegal tactics.

 

I think the problem with this debate is that we have one group who want to demonise all high-profile shorts and another group that want to defend all shorts. Why not just accept there are some "bad" shorts (whom we should all condemn) and some "good" shorts (whom we should all support for their contrary views)?

 

Oec, I think that is better.  I'm not against short-sellers, just like I'm not entirely in favor of anyone who is long.  I'm against members of both groups if they are colluding to drive a company's price up or down...manipulating the stock...hurting shareholders of the corporation...or straddling the lines of what is ethical.  My comments were simply in reply to the fact that just because Overstock's business has done poorly, does not mean that the act of manipulating the stock did not occur.  Cheers!

 

This seems reasonable, and we are in agreement.

 

It is certainly immoral to try to deceive. Prosecuting these sorts of things can, like when making rulings of free speech, prove to be sticky, as you aren't going to get all the bad guys, and might end up wrongly going after some of the good guys (but what isn't sticky when lawyers get involved?).

[ragnarisapirate]

Also, Bronte Capital Just put this up:

 

http://brontecapital.blogspot.com/2011/10/thinking-about-abacus-sign.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BronteCapital+%28Bronte+Capital%29

 

I think that it has some relevance in this discussion.