WATG
CCA, like many other shorts in this space, read everything in the worst possible lights. He is not alone. I start to see many similar messages on this ihub board lately.
CCA stated: "According to the AIC records for Jinzhou Lide, which are included in the OLP research report, Jinzhou Lide was established on April 26, 2010. ...
I'm doubtful that a business that has been operational for 2 months can be worth $15 million."
Obviously CCA have not done, nor does he/she have any inside to merge and acquisition (M&A). It is quite normal for a M&A transaction to take multiple steps. When a company acquires part of other company, it is almost mandatory as part of the process to register a new/interim company in order to separate the assets. As indicated in Roth's note, Jinzhou Lide is a step in the transaction, not THE whole transaction.
Register capital is another misleading argument. When you acquire a company, you buy the potential earning power, not the "registered" capital. Registered capital is mostly counting the cash. Although you can add equipment and plants into the mix (after discount and a lengthy review process,) you can never count the soft assets such as distribution network and customers as "registered capital". Unless the company to be acquired is in bankruptcy court, you will have to pay a good multiple over the the registered capital.
AI
