Kandi Technologies: A Significant Obstacle Has Been Hurdled
Feb. 18, 2015 5:24 PM ET | 63 comments | About: Kandi Technologies, Corp (KNDI)
Disclosure: The author is long KNDI.
Kandi announced Tuesday that the SEC has finished its probe into the company, which has been ongoing since November 2013.
The SEC does not intend to recommend that any charges be brought against the company.
This is great news for Kandi which should see a rise in stock price now that the air has been cleared.
On Tuesday, Kandi Technologies (NASDAQ:KNDI) announced that the SEC investigation into the company that began in November of 2013 has been completed and that the agency found no reason to bring charges against the company. This is welcome news for KNDI investors who know all too well the intense scrutiny that the company has been under since going public.
As the one-year chart shows, KNDI stock has been very volatile. This volatility has subsisted even though the company has been reporting positive earnings results that all point to increased revenue, profit and margins in the future. The Chinese government is still throwing support behind the electric car movement due to widespread pollution in the country, and KNDI's car-sharing program is successful and expanding. All of the fundamentals have been in place for KNDI to succeed, but the fear of regulatory action has been keeping a ceiling on the stock price.
Now that the rumors of shady business practices, cooking the books, etc. have been put to rest, the company can succeed on its own merit. Of course, it would be too optimistic to hope that all of the naysayers will go quietly, but now that a thorough regulatory agency like the SEC has cleared KNDI, all of those rumors and claims of illegal business practices will hold less weight than they did previously. If the SEC had full access to KNDI's records and operations and didn't find anything of note, it is doubtful that an individual or website that has no access to KNDI's private records could unearth some smoking gun.
This decision should improve investor confidence regarding KNDI, which is invaluable considering that the company's (unwarranted) negative reputation has been a thorn in its side since its reverse merger. The company's reputation has kept the stock trapped below a price ceiling, and I am confident that this ceiling has now been eliminated and that KNDI investors will see the fruits of this decision in the near future. A short squeeze is also possible as KNDI currently has 22.2% of its float short as of January 30, which makes it the 151st most shorted stock across major exchanges. As the market realizes the upward trend of KNDI's financials and with the threat of regulatory action now greatly diminished, the company's stock should see gains in the future.
Conclusion
The SEC announced that its investigation into KNDI is now closed and that it doesn't recommend bringing charges against the company. This decision should allow the company to overcome claims of illegal business practices and allow the stock price to rise without investors fearing regulatory action.
