China Minzhong Food Corporation

[safetyfirst]

Looking beyond everything, damn, that is really good detective work by Glaucus, kudos.

Decided to sell all my S-chips tomorrow.

Hi wildreamz,

I am not sure how old you are... but i think if you are in your 20s or 30s, you will probably still be working for the next 20 years. What you lose today is really a small % of what you are going to save in the next 20 years.

When i first started investing 5-6 years ago, i was into trading warrants, lost 20/30k due to expiry of warrants. Until today, i have kept the losses on my portfolio to remind me of my stupidity.

Since then, i have made back at least 10 times of what i lost while managing my family's portfolio. It is better to lose money now (while you are young) and learn from it than when you are close to retirement.

This too shall pass!

[pianist]

is this the guy from gic (saw fr cmz ar)?
LIM GEE KIAT
Independent Director
Lim Gee Kiat, Independent Director, is the Senior Vice President (Finance) and advisor
to Chairman of Ying Li International Real Estate Ltd. Mr Lim was previously a Vice
President at GIC Special Investments Pte Ltd, the private equity investment arm of
the Government of Singapore Investment Corporation Pte Ltd. In Mr Lim’s extensive
work experience spanning more than ten years, he has worked for various companies,
including DBS Vickers Securities, Fortune Venture Investment Group and SembCorp
Industries. Mr Lim graduated with a Bachelor of Engineering (First Class Honours) in
Electrical & Electronics from Nanyang Technological University and has a Masters of
Business Administration from Nanyang Business School. Mr Lim is a Certified Public
Accountant with the Institute of Certified Public Accountants of Singapore.

[felixleong]

When they short, maybe not only using sbl, for such instituions using of derivatives should be quite common too, therefore the halt would not affect them much

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I think those most affected by the halt are contra players, they will have to pick up the purchase in full and if cmz remains suspended their contra loss would be 100%

[touzi]

This is almost unreal. Can GIC, Fidelity and pre-IPO investors missed out the part on Hong Kong Yifenli Trading Co. Ltd? This is a HK incorporated company, so how difficult can it be to verify?

What about the NTU educated CFO ( singaporean or malaysian )? If this is a fraud, is he in cahoot with the crooks? What has he to gain that he is willing to risk it ( he will have to face the law should he ever return to Singapore or Malaysia )??

I am sorry to hear of the losses suffered by some of you.

[Wildreamz]

Looking beyond everything, damn, that is really good detective work by Glaucus, kudos.

Decided to sell all my S-chips tomorrow.

Hi wildreamz,

I am not sure how old you are... but i think if you are in your 20s or 30s, you will probably still be working for the next 20 years. What you lose today is really a small % of what you are going to save in the next 20 years.

When i first started investing 5-6 years ago, i was into trading warrants, lost 20/30k due to expiry of warrants. Until today, i have kept the losses on my portfolio to remind me of my stupidity.

Since then, i have made back at least 10 times of what i lost while managing my family's portfolio. It is better to lose money now (while you are young) and learn from it than when you are close to retirement.

This too shall pass!

I am really touched by all the kind words. I really, really appreciate them. Thank you all..

I am 27, not young any more.

[pianist]

27yo still very young le...
so I guess the losses will be small compared to yr earnings and savings in later years..

[weijian]

hi d.o.g,
Thanks for sharing your experience on CMZ. Since you were invested in CMZ until last year, may i hopefully ask whether you were physically around in at least 1 of the AGMs in the last 2 years? (if you were, i might have caught a glimpse of...!)

Jokes aside, there are a couple of things that puzzles me. IMO, Glaucus did not really do as much forensic auditing as the more well known ones like Muddy Waters did. In pg5 of their report as they have mentioned, the main bulk of their evidence came from matching SAIC records to the prospectus to debunk their top customer and top supplier via mismatched incorporation/deregistration dates. I believe these SAIC are publicly available documents (could be free or require a fee) and if these mismatches are true, i find it extremely alarming of the POOR QUALITY of the UNDERWRITER/AUDITOR DURING IPO.

To date, the majority of S-chips that exploded were the ones with Mgt as majority shareholders, ie. they had more incentive to window dress their company and then cash it via IPO. For CMZ, prior to IPO, Mgt had a stake of 9.2%, which subsequently reduced to 7.1% after IPO (pg 93 in prospectus) and they DID NOT sell any shares. The majority shareholders were the 2 PE funds and GIC who reduced their IPO stakes. If Mgt had earned their money, it wasn't largely through IPO but through selling their stakes to the 2 PE funds/GIC way before IPO. Why would Mgt continue to act out their script through to IPO and beyond the years? Were they in collaboration with the biggest winners (ie. the PE funds and GIC) to complete the show?

As d.o.g has mentioned many times - If one were in the shoes of Chairman Lim and the rest, is it more lucrative to commit fraud OR to continue to manage CMZ profitably with a manner of integrity?

I realized this last year and got out. The loss was painful, but I've had worse. With Minzhong I broke 3 simple rules of thumb. It had a limited track record, the managers were not the largest shareholders, and the business model consumed cash instead of generating it. China Minzhong is/was a reminder that I should not try to outsmart myself too often. Rules exist for a reason - to keep us out of trouble! Rules can be broken, but at one's own peril.

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Looking beyond everything, damn, that is really good detective work by Glaucus, kudos.

Decided to sell all my S-chips tomorrow.

hi Wildreamz,
About 1.5years ago, CMZ was a popular thread with some of the forumers like dzm87 making a contrarian call. He was one of the sole fellas who was doing so and he too, was dejected. I believe SMOL, Jared Seah posted something along the lines of 'keep your chin up...this is what trains your contrarian instinct, making calls that others wouldn't and blah blah blah......'. In the next 6 months, CMZ rosed by about 80-100%.

By relating this, i am not making a call that this will be so. But through the lessons of history and also practising some so-called 2nd level thinking (borrowed from the words of Howard Mark of Oattree Capital), do keep your emotions in check and continue thinking and digging.

I do have a vested stake in CMZ as well. I am not trying to make you feel better. I have lost as much as many other forumers previously. I look forward (excitingly in fact) to how the CMZ Saga will unfold because i find it pretty incredible in terms of how simple the fraud can be uncovered and also how i feel Mgt has greater incentive to make CMZ profitable in many more years to come. I look forward to see how this investment will poke holes into my own investment theory/process. I look forward to see how vulnerable audit systems REALLY are. I look forward to see how the Market reacts. I look forward to making my realized losses 'value for money' on the school fees that i will pay.

[Wildreamz]

Weijian, just one thought, if there are no new information and China Minzhong lifted trading halt right now, would you sell your shares? Or will you see it through?

[d.o.g.]

IMO, Glaucus did not really do as much forensic auditing as the more well known ones like Muddy Waters did. In pg5 of their report as they have mentioned, the main bulk of their evidence came from matching SAIC records to the prospectus to debunk their top customer and top supplier via mismatched incorporation/deregistration dates. I believe these SAIC are publicly available documents (could be free or require a fee) and if these mismatches are true, i find it extremely alarming of the POOR QUALITY of the UNDERWRITER/AUDITOR DURING IPO.

You are overestimating the quality of the work done by the average underwriter and auditor in preparation for IPOs. Remember that the underwriter does not get paid unless the IPO goes through. This means that unless the in-house lawyer tells the boss to his/her face "sign off on this and you go to jail" or something similar, the IPO is almost always going to happen. Ditto the auditor - they get paid to express an opinion, if they do not want to issue an unqualified opinion they will not be invited to stay on and will not get any future business.

Glaucus didn't need to do that much work. Their key pieces of evidence:

1. Late incorporation of the largest customer;
2. Second largest customer was an undisclosed related party and too small;
3. Too-small industrial park; and
4. Massively revised SAIC filings

are each independent proof that something is very wrong. Taken together, they are 4 smoking guns. Or, if you like, a smoking gun, a pile of matching spent cartridges, a dead body with bullet holes, and lots of blood. Any one of the 4 items alone would be sufficient to cross Minzhong off the list. In effect we have 4 times the evidence we need.

As for SAIC documents, only a Chinese lawyer or consulting firm can get access. China has started making SAIC records more difficult to obtain. In some provinces, only the companies themselves can retrieve the records now, making the SAIC search useless. see:

http://www.iflr.com/Article/3040279/Reve...ccess.html
http://www.nytimes.com/2012/10/27/busine....html?_r=0

[weijian]

Weijian, just one thought, if there are no new information and China Minzhong lifted trading halt right now, would you sell your shares? Or will you see it through?

hi Wildreamz,
It wouldn't be beneficial if i were to tell you what i would do. It is also not my behavior to reveal the direction of my trades in an online forum. Sorry! (hope u understand where i am coming from)

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WB had once proposed a solution where IPO aspirants hire 2 underwriters, 1 to go public and 1 not to go public. Both will present their case and one of them stand to earn all the fees depending on which way it goes..I thought this was a beautiful solution from the Oracle of Omaha. Then again, the stock market was created for companies to raise money, and not the other way around!

You are overestimating the quality of the work done by the average underwriter and auditor in preparation for IPOs. Remember that the underwriter does not get paid unless the IPO goes through. This means that unless the in-house lawyer tells the boss to his/her face "sign off on this and you go to jail" or something similar, the IPO is almost always going to happen. Ditto the auditor - they get paid to express an opinion, if they do not want to issue an unqualified opinion they will not be invited to stay on and will not get any future business.