Five reasons YUII will fail:
I understand that nearly everyone on this board lost of a lot of money on YUII--on paper at least--and that the only hope to get that money back is to pump the stock relentlessly and hope you can sucker enough people into buying to drive the price up. But anyone hoping for a real, sustainable recovery in the stock price is kidding themselves. And all these posts pumping the stock can only leave others holding the bag for a fundamentally worthless company and stock.
There are at least five major issues with YUII: (1) Delisting is certain, (2) The company has no auditor and is unlikely to ever have one again, (3) As a result of #2, the company can never file audited financials again, (4) YUII is going to be swamped by legal liabilities, and (5) The company cannot be trusted.
1. The NASDAQ appeal is a formality. YUII lied in public filings for two years, got caught, held a conference call to lie some more, filed documents with the SEC in support of the lie, then got halted. And the CEO who caused this mess has not been fired or even put on leave. A company simply can't lie to U.S. investors repeatedly, shamelessly and for two years and stay on a major exchange. Delisting is a 100% certainty.
2. No auditor is going to sign up with a company that admitted to deceiving its last auditor and exposed that auditor to potential liability. (YUII's last auditor has already been sued in the federal court for the Southern District of New York.) That's particularly true when the company is a small Chinese company, a sector that has generated scrutiny and heat for auditors from law firms, the SEC, and Congress. What auditor is going to risk massive liability and SEC sanctions--for a few hundred thousand dollars in audit fees--to sign up a client who is going to be delisted for securities fraud and (regardless) admitted to lying to its last auditor for at least two years? What auditor can have faith in that management team (which is unchanged so far)?
3. As a result of #2, you will never see an audited financial statement from this company again. They might--or might not--release an unaudited statement from time to time, but how will anyone ever believe the numbers again? The company has already admitted that it will lie to keep the stock price up. If you're buying YUII today based on potential earnings, cash in the bank, etc., you're doing it on trust that the company will tell the truth. They haven't done so in the past, and they will now have no auditor to keep them in check.
4. If the company does not just disappear, they face massive legal liabilities. There are three lawsuits against them in different federal courts and any one of them is absolutely certain to produce a judgment against the company.** They have admitted the most important element of a securities fraud suit--that they lied in order to keep the share price up. In other words, they have conceded that they made a material misrepresentation to the market. Some people think that if they actually bought other farms with the $12 million and they actually have tens of millions of dollars in a bank somewhere, that the lie wasn't "material." But if it wasn't material, why did the stock plunge when they got caught? You're never going to convince a jury that when a CEO lies for two years for the stated purpose of keeping the stock price up, then the company loses most of its value when the lie is revealed, that the lie was not "material." This case is a securities lawyer's wet dream. And YUII's liability is far more than the money they claim to have in the bank.
Moreover, YUII hasn't put up a fight so far, and it isn't clear they ever will. Some of you might also say "but the company hired Loeb & Loeb to defend them." That's wrong - Loeb is supposedly running their internal investigation, not defending any lawsuits. I've checked the dockets (using PACER) for all three lawsuits filed so far (Southern District of NY, Central District of California, Southern District of Florida) and YUII has not identified their attorneys in any of the cases. They have not "made an appearance," meaning showing up to defend themselves. They have been served with the lawsuit in each one, but they have done nothing in response. That can't inspire much confidence in shareholders--at this rate, there will be a default judgment for hundreds of millions of dollars. If the company pays, they're doomed. If they don't, they will have to fold up their tent and stop even pretending to be a U.S. listed company. If a company owes a federal court $100 million, what do you as shareholders "own"? Not much. Any dividend payments would be seized if they showed up in a U.S. bank account; ditto if the company somehow managed to sell itself. So how would shareholders ever get any value out of YUII?
**As a practical matter, the three (or more) suits will be joined into one; whoever lost the most money and has the most well qualified legal team will be the lead plaintiff and will represent the interests of the class.
5. Maybe most importantly, why would you buy stock in a company that has obliterated hundreds of millions of dollars of shareholder value by committing fraud on the market? A company that got caught and tried to cover it up solely to artificially inflate their share price?
Look, I realize that the share price may bounce around a while. It won't go to zero tomorrow. And the CEO has a very strong incentive to string penny stock investors along for as long as possible--he has to dump a lot of shares at as high a price as possible. And everyone here pumping the stock is helping him do so. But YUII has no future on the U.S. market, even if people are willing to gamble on the shares for a while. Without an auditor and with a history of admitted and blatant fraud, they will never be able to raise investment capital again. And they are absolutely certain to be overwhelmed by legal liabilities, meaning their "book value" and actual assets are irrelevant. If you're buying here, you are buying a time bomb. Good luck.