Replies to post #60259 on China Growth Stocks

[Traderfan]

TSTC, this is just another example why investors and big money turns away from this sector. I mean how can you have a 44 million credit financing facility, post that you didn't touch it yet and then do a 20 million financing the next day? Who would have expected this? It was impossible and clearly people got burned again.

[ratobranco]

TSTC - I doubt they will use the entire shelf. They raised it because they have an AR problem. At their current cash burn rate, the money should last them a couple years, even assuming they do not get paid.

I'm not a TSTC fan personally, but once the initial sellers are out of the way today, and assuming a strong tape, the stock may offer a nice bounce. Maybe back to yesterday's close. I'm not sure given that investors will surely be pissed, and this does change the story a bit. But it's a possibility, so traders should keep an eye out for signs of strength or a bottom.

Ironically, stocks that have completed offerings in this environment have gone up. Take YUII for example, whose offering was even more ridiculous, since they have plenty of cash and no AR problem. Getting the offering out of the way removed the overhang.

With that said, I'm not playing TSTC right now. It's a matter of principle. At worse, they tricked the market into thinking they didn't need money, and at best, they are just stupid (selling equity at forward P/E 5 when you have access to debt financing).