Despite every fiber of my being telling me to not get involved in the schoolyard fight between L&L Energy, Inc. (NASDAQ:LLEN) and apparently one of its enemies (that just so happens to have a short/bearish position in LLEN), I find myself unable to not sound off. A sane and unbiased observation has to be injected into the mix here.
If you're reading this, then odds are you're already aware that L&L Energy is an American company with 100% of its operation in China. Specifically, the company produces and distributes coal to China's coal-burning plants.
It's admittedly a situation that invites the possibility of accusations; how could anyone here verify anything the company claims about what's going on there? Even worse for L&L Energy, Inc. is that many Chinese companies (American-owned as well as Chinese-owned) were indeed found to be frauds a few years ago... a stigma that has haunted any company with a similar ownership/operational structure ever since.
To be fair, some of that skepticism is deserved; it would be surprising if there weren't still some sham companies "out there" in the ether. That's not a China thing though. That's an everywhere thing.
Still, for the same reason L&L Energy can't physically take American investors to its facility in China to validate its existence, an organization called GeoInvesting can't validate that any of its allegations either.... allegations that appeared in a lengthy and well-polished report posted at Seeking Alpha back on September 19th, basically alleging that LLEN was a sham.
You'll have to come to your own conclusions about L&L Energy, Inc. here. But, before you jump on the bandwagon, know that (1) anyone can post a reasonable-sounding commentary at Seeking Alpha, without going through any kind of vetting or fact-checking process, and (2) GeoInvesting garners a great deal of traffic and attention for its website by causing this kind of stir.
To its credit, GeoInvesting has uncovered several fraudulent Chinese stocks in the past, ultimately leading to their delisting. What's not clear, however, is how many fraud accusations it's made that were never actually proven or validated, and just faded away as the market lost interest.
Whatever the case, this is a situation where - now that the dust has settled - I'm more inclined to trust the market's treatment of LLEN rather than the media's more prevailing message (an echo of the original hit piece) regarding the company. And what the market's saying about L&L Energy, Inc. right now is that it sees more upside than downside; shares are up nearly 10% today, and are well up from where they made a hard landing immediately following the Seeking Alpha hit piece. Is it possible the bearish argument is now being made louder and more fervently because GeoInvesting's short position is not only not making progress, but is actually moving backwards? Just sayin'.
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Is it possible LLEN is a sham? Sure, but not any more so just because GeoInvesting said so.
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