Yangtze River Port and Logistics Ltd (NASDAQ: YRIV) stock is tumbling in the market today, trading on early declines of more than 24%. The declines come after a dramatic run for the top yesterday and are likely nothing more than profit taking by those that got in early.
Yesterday, I published an article explaining that YRIV stock is trading on lows due to a short report that was published by Hindenburg Research back in early December that suggested that management was siphoning money from US markets.
Since then, the company reacted by filing suit against Hindenburg Research and other entities involved in the report for defammation for the purpose of personal gain. In my view, this is a hands down win for Yangtze. I’m not going to go into detail today as I did that yesterday, but if you missed it, click here.
Nonetheless, there’s a bit of an elephant in the room. On May 29, 2019, YRIV announced that it received a delisting notification from The NASDAQ Stock Market LLC. However, the company appealed this decision and in my view, it’s nothing to be concerned with. Here’s why:
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Why I’m Not Concerned About YRIV Stock Being Delisted
The truth of the matter is that the delisting notice came shortly after the Hindenburg Research report. Following the report, the stock fell from more than $11 per share to just over $1 per share, and held a relatively low price since.
This is going to trigger warnings for NASDAQ staff, whose job is to protect investors. I believe that this, combined with a skewed opinion as the result of an invalid report led to the delisting notification and that the appeal will likely result on YRIV stock’s listing being maintained.
Breaking it down, the NASDAQ gaive three reasons for potential delisting:
- The belief that the company participated in a scheme to artificially support its stock price. This, of course, was a direct allegation made in the short report published by Hindenburg research.
- The belief that the company made false and misleading statements in press releases and to NASDAQ staff. Once again, this belief is likely derived from the Hindenburg Research Report.
- The belief that YRIV has failed to make significant progress towards executing its business plan since uplisting over 2 years ago. A claim once again, made by Hindenburg Research.
In response to the letter received from the NASDAQ, YRIV addressed the idea that the company artificially inflated share prices through investments made by family and friends. These allegations were made based on the fact that two original shareholders of the company invested, there was an account that listed an authorized trader who is an advisor to the company, and three active brokerage accounts were held by the CEO of the company.
However, it’s not uncommon for original investors to hold on, nor for the CEO of a company’s friends, family, and neighbors to show their support for the work that the CEO is doing by buying stock. The simple fact that the CEO knows some investors is not a basis for allegations that the company is artificially increasing its share price. Obviously, the company pointed this out in its appeal.
As to the second part of the allegation, the company said that it has not made misleading statements in press releases or to NASDAQ Staff. This allegation came with regard to legal judgements against the company.
NASDAQ said that YRIV indicated in a December 12, 2018 press release that initial proceedings were instituted before properties appreciated, doubling in value between 2017 and 2018. As a result, the company said that the purchasers were reluctant to enforce judgements and sell back the properties to Wuhan Port.
NASDAQ Staff believes that these statements are false. However, in its appeal, and in previous responses, YRIV informed NASDAQ that after judgements were entered in July of 2018, its subsidiary held talks with the party with regard to repurchasing the commercial units. However, due to the value of the properties, the purchaser asked its subsidiary to continue developing these areas according to the original development plan, stating that they were no longer willing to enforce the judgement. As such, YRIV had done no wrong doing.
Finally, when it comes to the company not making significant progress, this couldn’t be further from the truth. The company was actually in the process of raising funds for the development of assets when the Hindenburg Research report hit. While this has dampened the company’s ability to do so, it argued that it has made strides in the right direction, effectively progressing along its original business plan.
Lets Dial It Back A Bit
The truth of the matter is that when you dive into the reasons that the NASDAQ made the determination to delisty YRIV, it can be scary. However, digging into the response by the company suggests that there’s really nothing to be concerned about here.
I hold the firm belief that if there was never a Hindenburg Research report, making false allegations about the company, there would never have been a delisting notice. As is the case with the lawsuit against Hindenburg and its collaborators, I strongly believe that Yangtze River will easily win the appeal and maintain its listing on the NASDAQ.
The Bottom Line
The bottom line here is that my opinion has not changed. Short sellers often hit stocks with misleading statements. However, due to the short term effects of their actions, they are very rarely called out.
However, in this case, YRIV stock has been devastated, and Hindenburg is finally being called out. This alone, in my opinion, shows that the company hasn’t done any wrong doing here. After all, if it had, why would it open itself up to investigation in a legal system?
I believe that once the smoke clears, the case is over, and the NASDAQ appeal is finalized, it will be largely back to business as usual. Moreover, as this takes place, YRIV is likely to rocket in value. So, don’t let today’s dip concern you, there’s still plenty of opportunity ahead.
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Today falls a lot. Any negative news? something to be alarmed about?
it sinks
So now that we are delisted, where do we go from here despite the 15 day appeal? Why would the NASDAQ delist on the day of the court hearing AUG 20th? Strange. NASDAQ should have waited until the hearing was complete as judgement could have been in YRIV’s favor. If not, then delist!
I agree with you. They should have held off for the decision. As far as where we go, well, there’s not many options. Let’s hope the appeal goes well. If not, we’ll be waiting until the hearing is over to learn about further steps.
Hey Josh, regarding YRIV, how long before the appeal hearing decision is heard? And is there anything we can do in the meantime?
There’s not a whole lot that can be done in the meantime. The appeal will have to be filed within 15 days. As far as how long a decision may take, there’s no telling at this point.
Looks to be delisted. So what does that mean for investors?
Unfortunately, delisting means lack of liquidity and lack of access to cash from capital markets. I am hoping that in the long run, once the court ruling takes place, we can see a reversal.