My brother was an auditor and drummed into me the fact that an Audit can't detect sophisticated fraud.
Whilst the China Hustle cost me an eye watering sum on a soccer boot company that not only had: * a well known Australian Auditor * a well respected Retired Captain of Industry as a Chairman * a stock broker I know well as a director and shareholder
It also had the support of a shonky banker.
Corporate Fraud is an International Problem. There is nothing China specific about it. The big ones I have researched were:
* Bernie Madof's Ponzi Scheme, * Barkley Banks roque trader who hid his futures trading losses in the balance sheet as an asset, * The Italian Parmalat which hid its losses in the balance sheet as a fixed deposit with CitiCorp.
It's one of the risks an investor needs to manage. The way I try to do that is:
* Stay well clear of IPO's. It's easy to fiddle with forecasts. * Avoid companies that don't have a long history in public ownership. * Avoid companies that have not survived for a long time on operating surpluses. Bernie Madof lasted for 17 years because he was able to live off other peoples capital by increasing the funds under management every year. A dud manager using the fraud method can unfortunately do that * Don't go near stuff whose assets are intangible and not supported by operating free cash flow. As the Oracle of Omaha said he wouldn't buy all the bit coin in the world for $50 because it doesn't earn anything. * Stay away from companies with a business plan that isn't very adequately fully funded to the critical mass required to be profitable.
If anyone can add to the" what to avoid" list please do.
The CR:
Most posters recognise the importance of strengthening the balance sheet at this point in time given all the stuff thats going on.
Interesting to note how much investors and the market appreciate a strong balance sheet.
After the last CR in 2020 @45c the share price opened up 33% on the issue price after the funds were secured and the trading halt was lifted.. It went on to finish up 42% on the issue price and up 6X on the 11c the market was valuing the shares at when fear of the future was at its peak a couple of months earlier.
Those who thought they would buy at 15c on market a couple of weeks ago were dreaming. Now they have the chance of buying as many as they want and the price has been de risked to buggery.
That was
VMT Price at posting:
15.0¢ Sentiment: Buy Disclosure: Held
(20min delay)