Author Topic: CHGY - China Energy Corp  (Read 2477 times)

claphands22

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CHGY - China Energy Corp
« on: June 03, 2013, 04:23:29 AM »
This is a weird one, but so weird, I have to share.

CHGY, is a Chinese RTO that never matured onto a major exchanged and has languished on the OTC. Supposedly, the company owns, via contractual agreements and a shell company in the Caribbean, Inner Mongolian coal mines. The stock has utterly collapsed and the management decided to go private." In order to go private, the company is going to do a 1 to 12,000,000 reverse split. The left over fractional shares will be bought at at 0.14 a share and the shares currently trade for 0.135 to 0.13. "The reverse stock split will be effective on or about June 7, 2013 "

Lots of odd things in here, Inner Mongolian coal mines, million share reverse split and a Chinese RTO but the oddest thing is the insane valuation that was put on this company. Here are some beauties...

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http://www.sec.gov/Archives/edgar/data/1335137/000114420413026199/v343538_prer14c.htm

Tax costs, foreign currency restrictions, statutory reserve requirements, and Company dividend policy all indicate that it is unreasonable for foreign Company investors to expect dividends.

Summarizing the relevant per-share value indications:
 
●   The Income Approach value was $4.72 (minority marketable)
●   The Market Approach value was $0.17 (minority marketable)
 
The difference between the two values is 97%. It arises because the Income Approach value takes no account of the effect of PRC currency restrictions that prohibit foreign investors from receiving the indicated value of discounted ECF and non-operating assets, while the Market Approach value reflects this.
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Anyways, I think it's highly likely the transaction will go through. Other Chinese RTOs that have gone private in a similar manner have paid their shareholders and why would they put on this whole "valuation" show if they weren't going to go through with it?

 Fun, fun, fun...
« Last Edit: June 03, 2013, 11:43:05 PM by Parsad »


Hielko

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Re: CHGY - China Energy Corp (odd idea--going private)
« Reply #1 on: June 03, 2013, 05:40:57 AM »
I own some shares, but I doubt that you will be able to buy a position between now and the effective date of the split. Liquidity is very low.

ItsAValueTrap

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Re: CHGY - China Energy Corp (odd idea--going private)
« Reply #2 on: June 03, 2013, 08:48:08 AM »
QXM's takeover/merger failed.  YONG was in the process of being taken over but now the stock is halted.

HRBN and FMCN are examples of takeovers that have gone through. 

I have no idea whether the takeover will go through or not.
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claphands22

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Re: CHGY - China Energy Corp (odd idea--going private)
« Reply #3 on: June 03, 2013, 11:27:44 PM »
I own some shares, but I doubt that you will be able to buy a position between now and the effective date of the split. Liquidity is very low.

I agree.

QXM's takeover/merger failed.  YONG was in the process of being taken over but now the stock is halted.

HRBN and FMCN are examples of takeovers that have gone through. 

I have no idea whether the takeover will go through or not.

Yeap, but this is a bit different. It's already on the OTC, it's not being acquired, the management paid for the going private initiative and it doesn't need much money to go private.

All these RTOs stink, but this is an odd stinky one.  I won't be participating in it, but it's an odd/interesting idea.