Things seem to be moving forward with Greenstar. They are still not out of the woods but it was a big relief to know that the CFO, who flew over to China, confirmed the story of the CEO and that there's nothing else going on. It was my biggest fear that there was more than meets the eye with this crisis....and there still may be, but such fears have been quelled given recent news. Major hurdles have been cleared. Now that the finance chop has been replaced the audit can be completed and it should be a matter of short time before it gets done and the financials can be filed. Management is targeting the end of the month but don't be alarmed if it ends up taking a little longer. There's a few moving parts for this thing to get done and so the company probably needs a little good fortune for all to go smoothly. One possible remaining concern is the cash in the bank. Was there any funny business going on with the cash while the controller had possession of the finance chop? It's highly unlikely as it requires both the finance and legal rep chop to make transactions. So, the only way the cash was tampered with is if the controller and CEO were conspiring and that too seems quite unlikely. If that was the case, I don't think the CEO would have been cooperating with the board the way he has as well as supporting the company with his own money (the bank accounts are frozen without the finance chop). If he was guilty of wrongdoing I think he would have behaved a lot differently and pulled the plug much like what the CEO at APX did.
If and when the financials are filed, I suspect the company will also have to provide an explanation to the regulators as to how they intend to ensure that a similar crisis will not happen again before trading gets reinstated. As mentioned in a prior news release, the company has plans, but will they be enough to satisfy the regulators? That is another remaining risk but I don't think it's one to be overly concerned about.
As I stated last post, if Greenstar can survive this crisis they could end up being stronger as a result. In completing the audit, they will have satisfied higher standards as per the mandates being enforced by CPAB which I also touched upon in my previous post. They will have identified and corrected a major weakness to their corporate structure and I'm quite sure they will also be examining other potential weaknesses and take a proactive approach to address them as well. They will do everything they can to win back investor trust. However I'm sure some people are not going to look at this way. There will be those who will take a pessimistic view and claim Chinese companies can't be trusted no matter what. There are bitter shareholders out there I'm sure, who will be eager to sell at some point if and when trading resumes. I will not be one of them.
This crisis as serious as it is, did not involve fraud nor has it harmed the company's operations or prospects in a material way. From what I can tell, there have been no major disruptions and the Canadian acquisition is still on the table. People make mistakes. Some mistakes are forgivable others are not; in my opinion this is the former. The CEO Guan appears to be mainly at fault here for letting the situation with the controller get too far out of hand and didn't inform the board until it was too late. I think he learned his lesson here and deserves a second chance. Let's hope he gets one.
