HRBN - it seems you were right that it was the CEO that got Goldman involved, rather than Baring, which I had assumed.
"Mr. Yang has further advised the Company that he intends to proceed with a proposal to take the Company private at the previously announced proposed price of $24.00 per share, that he will seek alternative sources of financing for the transaction, and that Goldman Sachs (Asia) LLC will continue to act as financial advisor to Mr. Yang in connection with the transaction."
At the same time, I think the fact that he is now saying that he will seek out alternative sources of financing is clearly a disappointment relative to what the market was expecting. Before, the market had thought there was a firm buyer in place, specifically Baring (though without a contractual commitment), but now the story is that Yang is going to go to the market looking for buyers, with Baring having the option to play at 10% if they want. Much shakier IMO.
I think if you buy Harbin right now, the buyout should be seen as an extra bonus. You have to buy the stock on its own corporate merits. Given the forward P/E of 5.20, it's definitely a buy, provided the financials are clean.
Many seem to see the ongoing buyout offer from the CEO as reason to believe that HRBN has clean financials. I think that makes sense, and I think the probabilities say HRBN is legit (although I still have no answer to the margins argument from the shorts--that's the one thing we need for a slam dunk: to find a company exposed to high-speed rail with similar GM's to HRBN).
At the same time, we have to remember that it would be in the interests of the CEO to go private if there were a specific kind of fraud--tax fraud--that presents the risk of damage to corporate standing (i.e. CSKI) if uncovered through SEC reporting. Also, we don't know how much of the CEO's personal money will go to the buyout. If he is putting in large amounts of his own money, that is one thing (very compelling), but if he is offering primarily his shares, and using other people's money to foot the bill, then that is an entirely different thing (not nearly as compelling).
The biggest upside IMO is not the buyout offer, but rather the possibility that Yang knows something, given his political position in China. Maybe he knows what sorts of contracts or orders are coming for his company in conjunction with the new five year plan, and disclosed that to Baring and other potential buyers. Maybe that's part of the reason why he wants to go private. Obviously bullish.
I am not a buyer yet because I think Roddy Boyd is going to put out an "I told you so" hit piece. That will be the bottom IMO.
