Disclaimer: I know nothing of Choada, and for all I know, they'r a fraud. However, I have some problems with this report.
1) So they think they spotted a fraud. This has been happening a LOT lately in China. These days, it's not so hard for bears to do this to a good company and force delisting, even if the company is actualy solid.
2) Ok, so some auditors left, and some executives left. This happens to companies. Certainly cause for some investigation, but not necessarily red flags.
3) There's heavy insider trading happening. This is less regulated/enforced in China. That's bad, but commonplace.
4) The statistical analysis on page 13/14 is extremely weak. On p 14 they've done little more than turn the chart on p13 sideways and throw on some confidence intervals. Smoothing profit margins is something that good management often does. I wouldn't say that it points to fraud.
5) Inflated capital spending can be a sign of growth (lease acquisitions, etc.)
The descriptions of "shell companies," that follows all strike me as sensational, and not necessarily substantial.
1) So they think they spotted a fraud. This has been happening a LOT lately in China. These days, it's not so hard for bears to do this to a good company and force delisting, even if the company is actualy solid.
2) Ok, so some auditors left, and some executives left. This happens to companies. Certainly cause for some investigation, but not necessarily red flags.
3) There's heavy insider trading happening. This is less regulated/enforced in China. That's bad, but commonplace.
4) The statistical analysis on page 13/14 is extremely weak. On p 14 they've done little more than turn the chart on p13 sideways and throw on some confidence intervals. Smoothing profit margins is something that good management often does. I wouldn't say that it points to fraud.
5) Inflated capital spending can be a sign of growth (lease acquisitions, etc.)
The descriptions of "shell companies," that follows all strike me as sensational, and not necessarily substantial.