Thrown under the bus, Harbin style (HRBN)

After the close today Harbin Electric (HRBN), a Chinese reverse-merger company that has become a battleground between short-sellers and various touts and promoters, issued a flurry of filings, but only one press release. The press release trumpets the filing of a definitive proxy statement relating to the attempted acquisition of the company by Harbin’s CEO Tian Fu Yang, and gang at Abax (yes, the same moronic Abax that has its own founder on the Board of Directors of halted reverse merger scam China Natural Gas (CHNG)):

HARBIN, China, Sept. 29, 2011 /PRNewswire-Asia-FirstCall/ — Harbin Electric, Inc. (NASDAQ: HRBN), a leading developer and manufacturer of a wide array of electric motors in the People’s Republic of China, announced today that it has filed definitive proxy materials with the Securities and Exchange Commission in connection with the Company’s merger agreement with Tech Full Electric Company Limited (“Tech Full Electric”). The mailing of such proxy materials to shareholders is expected to begin immediately.

What the press release fails to mention is that Harbin also tried to sneak through an amended version of their annual report for 2010. The new filing, a 10K/A is filled with choice nuggets. Here’s one from a brand new paragraph under “Risk Factors” that did not appear in the original version, we find that Harbin is getting ready to, if when the hammer comes down, throw a certain US-based employee under the bus:

We rely on the services of our SEC reporting manager to assist us in researching and resolving certain US GAAP accounting issues and preparing our consolidated financial statements.

We employ an SEC Reporting Manager who is a Certified Public Accountant in the United States to assist our internal accounting and finance personnel in resolving complex US GAAP accounting issues. From time to time we rely on her to conduct research on complex accounting issues relating to US GAAP and to provide advice to the Company as to how to comply with US GAAP. Although our SEC Reporting Manager is not involved in our day to day operations or the management of our accounting functions, she also assists us in our consolidation process and in preparing our consolidated financial statements and footnotes. If we were to lose the services of our SEC Reporting Manager, we would attempt to hire another similarly qualified person to replace her. The loss of the services of our SEC Reporting Manager, in the absence of a qualified replacement, could adversely impact our ability to accurately prepare our consolidated financial statements on a timely basis.

Is it so outlandish to think that this is a convenient excuse for Harbin executives? “Oh, those SEC filings, that wasn’t us, that was our ‘Reporting Manager'”

More tidbits to come from the most important Harbin filing issued all year.

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  1. Here is also something interesting.

    On Thursday, just hours before HRBN released their announcement about the vote, someone bought 2,500 $20 Calls expiring on Friday (9/30/11) (these are the weekly options).

    There were only 120 open calls prior to the huge buy.

    There were no other large call purchases on Thursday.

    The 2,500 calls purchased at $0.30 when the stock was trading at $19.20 (close for Thursday) and would expire at end of day Friday – in one day.

    The stock would have to move $1.10 (from $19.20 to $20.30) on friday to to just BREAK EVEN.

    Why would someone take such a big gamble???

    Well, let’s take a guess….someone who absolutely knew this info was being released.

    And like clockwork, first thing this morning 2,500 contracts traded at around $1.00+.

    Nice profits.

    This should be sent to the SEC….it is clearly insider trading.

  2. What are the chances that the deal is real? This stock seems to be ripe with the smell of fraud. I’m betting the deal is a fraud but I’m an amateur and I have never seen this situation before. With the voting date and buyout date set so far I’m on the losing side of a moderate sized bet, for me anyway. I plan on riding my bet into the ground if I’m wrong. Good times, who needs soap operas when you can watch the stock and read SEC filings.

    1. @Kyleak

      The question becomes who is being scammed in the end…perhaps it is CDB and Abax that are the ultimate suckers? For certain everything about HRBN smells bad. The pedigree, the too-good-to-be-true numbers, the bizarre filings, etc. Count me shocked if the deal really closes. Might get strung out for a long time though, like the XING/QXM failed deal.

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