Sino-Forest Goes Timber

Jun 4, 2011
J. Webster
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Talk about getting crushed, Sino-Forest’s stock was chopped down after a report released by Muddy Waters LLC – who are shorting the stock and doing quite while so far. The stock went from $18 to around $5 in a few days, down over 63% give or take. Just wow.

What did the Muddy Waters report say, it called Sino-Forest a Ponzi scheme. The full report is here.

Sino-Forest is a Chinese lumber and forest plantation company, basically they buy and sell forests in China. Buying Chinese stocks has always been a risky business, as too much is unknown and their rules and regulations are even more fragile than the ones in the United States. They seem to be ripe for fraud and extremely violate.

However, some guru investors aren’t afraid of buying Chinese stocks, one being John Paulson, who wisely shorted the financials prior to the market collapse and then bought back the banks just after the collapse. The hedge fund of Paulson and Co. is Sino-Forest’s biggest shareholder, as they own 34.7 million shares. So, if Paulson didn’t sell his Sino-Forest shares prior to the Muddy Waters report, he lost half a billion dollars in a day or two.

Here’s the story on Sino Forest from CNBC’s Herb Greenberg:

So, if you’re stocks took a hit this week don’t feel so bad, can’t be as bad as that.

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