“From educational success to financial scams”
On May 11, 2007, the stock price was $7.95. Four months later, the price was closed at $0.28 on September 26, 2007. Investors have lost approximately 96% of their asset value in a less-than-six-month period. The name of the company was China Expert Technology (OTC Symbol: CXTI). Finally, on November 28, 2007, a class action lawsuit was filed in the United States District Court for the Southern District of New York. So, what takes the investors so long to realize they have fallen into a financial scam? First of all, the company has been following the United States accounting rules, instead of choosing a more straightforward and less strict Chinese rule, since it was first set up. Second, the company had hired one of most famous international accounting firms to audit its own books. Third, the headquarter of this company was located at one of the most well-developed and famed financial centers in Asia, which is Hong Kong. In other words, the company had come under the scrutiny of a more complete and civilized laws for years. At last, it had widely announced tens of projects and contracts which worth over $300 million and would generate revenue $20-35 million a year. Under such “perfect” conditions for a publicly traded company, everybody saw this as a bargain. And even ‘one American hedge fund manager amassed a 20 percent stake in the company’ (Norris). But in reality, tons of news had been published right before the scandal began. At the end of May, its chief operating officer had resigned from the office due to mutual agreement. And two months later, its chief financial officer also quitted his job for personal reasons. Finally, the company was late in filing its quarter earnings report in August. However, the price ...