WUHN was formerly a NASDAQ traded company, but like many Chinese deals that don't have household names, a lack of interest in this one got it down listed to the OTC market. For all its compliance problems, the company's operation does seem to be on the up and up. In fact, we can't find a single suspicious event, although it does seem strange that the company filed its intent to conduct a one for 10 reverse split last June, but then never executed it. They probably figured that at best, all they would accomplish is a delay in the inevitable NASDAQ delisting.
Unlike most penny stock P & Ds, this one is a real company, actually conducting a real business and generating real profits. And yet, people will lose their asses on the stock with this P & D.
What the hijackers have done, is found this company with great looking fundamentals, and a book value of $3.55 per share, trading under a nickel, making it an easy subject for a Pump & Dump. The company makes money hand over fist and in cash alone is worth about $1.24 per share. So why is it trading so low? Because rarely is an investor going to profit with this type of investment. As it is a Chinese company, the communist government has a stranglehold on the operations of the company. It will never be a takeover candidate. It is immune from its shareholders for any wrongdoing (who's going to sue it in China?). And dividends will not be paid. There is little if any upside to owning this type of company. The US stock markets are full of these kinds of profitable companies with anemic share prices.
So the hijackers come in and buy up some stock through the retail market from those that invested in it during its NASDAQ days. They paid pennies on the dollar. We figure that they've bought up a couple of hundred thousand shares over the last two weeks, at an expense of around 10 grand. Just look at the closing prices all the way back through December.
|WUHN Closing Prices|
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So will you get stock for a nickel? A dime? Not a chance! We don't think retail buyers will get any at the open for as little as a quarter. You see, the Chinese own most of the stock and we promise you that they aren't selling for 10% of book value. So the result is that there is very little stock for sale. That isn't to say that their won't be any trades at a nickel dime or quarter on Tuesday morning. But we expect that those trades will be executed by the market makers who will be loading up before you and I can. We expect the stock to open at well over quarter and then for the same few hundred thousand shares to churn over. And over. And over. We wouldn't be surprised if the loose shares each traded 10 or 20 times on Tuesday, creating a false sense of volume. We also wouldn't be surprised if the stock trades up to or over a buck tomorrow. Demand will be that strong, thanks to the hype and the below book value state of the stock. The hijackers who front loaded will be cashing in a healthy profit. Their $10K investment could net them $100K - $200K. Not a bad day's scam.
The market makers will make even more if they short (as only they can) in the morning and then cover when shares come crashing down towards the close. And crash down they will. If not Tuesday night then Wednesday or Thursday. A lot of people are going to get suckered into this scheme.
Now if by chance the hijackers decide to keep this scheme going for a few days and bring in other stock pimps, the price may hold up for a couple of extra days. We don't think that will happen, but even then, nobody is going to see the kind of returns that the perpetrators of this hijacking will see. And the laws of gravity will inevitably apply to WUHN's share price. Gravity always applies.
Tuesday's action on WUHN will be the definition of a pyramid scheme.