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Puda Coal (OTC:PUDA) Stock, Option Chain

Puda Coal Inc is a supplier of metallurgical coking coal to the industrial sector in the People's Republic of China.

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Valuations now look extremely attractive

News

Puda Coal Audit Committee Announces Receipt of a Letter From CITIC; Ming Zhao&#39;s Counsel Resigns  

Management

Puda Coal Received Resignation Letter from CEO 

Puda Coal Inc

View <a href="http://www.sec.gov/news/press/2012/2012-31.htm">here</a>.

Legal

SEC Charges Puda Coal Execs with Fraud

<div class="widget-wrapper"><a class="Covestor_hook" href="http://covestor.com/stone-fox-capital/opportunistic-arbitrage"> </a>
<script class="Covestor_injector" type="text/javascript" src="http://widgets.covestor.com/chart/stone-fox-capital/opportunistic-arbitrage"></script></div>
<a href="http://blog.covestor.com/content/2011/04/mark-holder2.jpg"><img class="alignleft size-full wp-image-7687" title="mark-holder" src="http://blog.covestor.com/content/2011/04/mark-holder2.jpg" alt="" width="154" height="143" /></a>Author: Mark Holder, <a href="http://covestor.com/stone-fox-capital">Stone Fox Capital</a>
Covestor model: <a href="http://covestor.com/stone-fox-capital/opportunistic-arbitrage">Opportunistic Arbitrage</a>
After a strong 2009 and 2010, 2011 was a year to forget for this portfolio. The market hit highs around the end of April and this model was soaring to new heights at the time. Many of the holdings had valuations nowhere near the 2007/08 peaks or even close to what would normally be considered rich. Regardless, leverage was reduced since some gains were significant. Then, unfortunately, most of the stocks collapsed and even in a few cases approached 2009 lows. With too much leverage left, the model was hit very hard.
The good news is that according to my assessment, valuations started the year as attractive as they were during the financial collapse of 2009.
2012 Outlook
Portfolio Construction
The portfolio remains overweight on the global growth theme. Most of the stocks in this sector trade as if emerging markets are headed towards a recession, instead of continued growth.
The biggest challenge to our investment strategy in 2011 was the major inflation fear in emerging markets like China, India, and Brazil. As 2012 begins, all these countries <a href="http://www.bloomberg.com/news/2012-01-24/india-lowers-reserve-ratio-as-bric-nations-move-to-protect-economic-growth.html" target="_blank">are </a><a href="http://www.bloomberg.com/news/2012-01-24/india-lowers-reserve-ratio-as-bric-nations-move-to-protect-economic-growth.html" target="_blank">reporting</a> lower inflation numbers, which is supportive of monetary easing that has already started in most cases. This removes a significant headwind for the global growth theme going forward.
2011 ended so badly that finding stocks that exceeded expectations for the year is difficult. Liz Claiborne (<a class="ticker" href="/stock/liz#">LIZ</a>) was probably the best performer, as the transformation away from the namesake brand towards kate spade, Juicy Couture, and Lucky Brands was completed. With the announcement of the new Fifth &amp; Pacific (<a class="ticker" href="/stock/fnp#">FNP</a>) name and stock symbol, the stock surged to 52 week highs. As kate spade <a href="http://www.marketwatch.com/story/liz-claiborne-inc-announces-november-and-december-direct-to-consumer-comparable-sales-2012-01-09" target="_blank">continues </a><a href="http://www.marketwatch.com/story/liz-claiborne-inc-announces-november-and-december-direct-to-consumer-comparable-sales-2012-01-09" target="_blank">reporting</a> strong sales comps, more is expected out of Liz in 2012.
Just about every other stock was uniformly disappointing. Even stocks like Riverbed Technology (<a class="ticker" href="/stock/rvbd#">RVBD</a>) that met original earnings estimates were hit hard. Of course, I'd be remiss in not mentioning the fraud accusations against Puda Coal (<a class="ticker" href="/stock/puda#">PUDA</a>) that sent the stock to the pink sheets and the bankruptcy of MF Global (<a class="ticker" href="/stock/mf#">MF</a>) that wiped out a small position in the speculative stock.
Our top sectors for 2012 include Emerging Markets, Networking Equipment, Life Insurance, and Oil Services. Though the model doesn't generally focus on a sector lead approach, these sectors provide such great opportunities that the model has found multiple investment options.
Global Markets
As mentioned above, emerging markets were a theme from 2011 that has become even more attractive following dramatic selloffs in stock markets such as China and India. Europe, though, remains the biggest concern. As 2012 began, it appears that the ECB 3 year liquidity program has had an unexpected impact on lowering <a href="http://www.eurointelligence.com/eurointelligence-news/archive/single-view/article/ecbs-liquidity-policies-are-beginning-to-work.html" target="_blank">Spanish</a><a href="http://www.eurointelligence.com/eurointelligence-news/archive/single-view/article/ecbs-liquidity-policies-are-beginning-to-work.html" target="_blank"> and </a><a href="http://www.eurointelligence.com/eurointelligence-news/archive/single-view/article/ecbs-liquidity-policies-are-beginning-to-work.html" target="_blank">Italian </a><a href="http://www.eurointelligence.com/eurointelligence-news/archive/single-view/article/ecbs-liquidity-policies-are-beginning-to-work.html" target="_blank">bond </a><a href="http://www.eurointelligence.com/eurointelligence-news/archive/single-view/article/ecbs-liquidity-policies-are-beginning-to-work.html" target="_blank">yields</a>. This has led to at least a short term reprieve from fears of European contagion. As long as this continues, cheap US stocks can rally. Until the Europeans resolve long term funding issues, the threat will always hang over the market.
As far as individual stocks, the model is more invested in companies benefiting from emerging market growth than firms headquartered in those countries. Look for that to change as the year progresses.
Some top picks include Weatherford International (<a class="ticker" href="/stock/wft#">WFT</a>), which should benefit from increasing oil demand, and Foster Wheeler (<a class="ticker" href="/stock/fwlt#">FWLT</a>), which should see revenues grow from the need for the construction of more power plants and LNG terminals.
Crane manufacturers Manitowoc (<a class="ticker" href="/stock/mtw#">MTW</a>) and Terex (<a class="ticker" href="/stock/tex#">TEX</a>) should see a continued pick up in both domestic and international markets as the need for global construction equipment finally rebounds from the crisis. Alpha Natural Resources (<a class="ticker" href="/stock/anr#">ANR</a>) should benefit from its positioning as the #3 metallurgical coal miner in the world.
ChinaCache (<a class="ticker" href="/stock/ccih#">CCIH</a>) is the leading CDN provider in the fast growing China internet market. Look for that market to continue growing and the stock to rebound as investors become more comfortable that not all China stocks are frauds. Look for more direct investments in Brazil and India as the year progresses.
U.S. Market
U.S. stocks enter 2012 extremely cheap in my assessment. If Europe ever retracts from the headlines, this market should rally strong. Economic data was generally strong as 2011 ended, suggesting better times ahead.
The presidential election remains a big concern as the year progresses. I believe Obama losing the presidential race would generally be good for the markets, at least in the short term. Unfortunately though, a good stock market early in the year due to a strong economic rebound could actually place Obama in a position to win the election. This could actually tank the markets in the second half.
U.S. stocks are lead by opportunistic investments in Monster Worldwide (<a class="ticker" href="/stock/mww#">MWW</a>) and SodaStream (<a class="ticker" href="/stock/soda#">SODA</a>). Both stocks were absolutely crushed in 2011, so the model picked them up on the cheap later in the year. These stocks could rally even without a strong economy. SodaStream especially has the chance to expand market share in the home beverage market that should remain robust regardless of the economy.
A couple of oil related stocks should continue to benefit from the expanding unconventional shale plays in the U.S. As the U.S. looks to move closer to energy independence, both oil producer Carizzo Oil &amp; Gas (<a class="ticker" href="/stock/crzo#">CRZO</a>) and hydraulic fracturing company C&amp;J Energy Services (<a class="ticker" href="/stock/cjes#">CJES</a>) should benefit from high oil prices. Low natural gas prices have held the stocks down, but that might not last long as the U.S. looks to begin exporting LNG in the future.
Look for networking equipment stocks Riverbed Tech and Radware Systems (<a class="ticker" href="/stock/rdwr#">RDWR</a>) along with storage equipment provider OCZ Tech (<a class="ticker" href="/stock/ocz#">OCZ</a>) to benefit from the need for faster corporate networks and cloud computing.
Insurance providers Hartford Financial (<a href="http://www.google.com/finance?q=NYSE:HIG&amp;fstype=ii" target="_blank">HIG</a>) and Lincoln National (<a href="http://www.google.com/finance?q=NYSE:LNC&amp;fstype=ii" target="_blank">LNC</a>) trade below 50% of book value and continue to provide solid earnings that increases book value each quarter. Look for thefinancial sector to break away from group trading as the financially fit such as these two rebound.
Conclusion
At the end of the day, though 2011 was very disappointing, the returns for the first three years of the model were still exceptional - up 103.6% since 1/29/09 inception through the end of 2011.
Investors should understand that this is a high risk/high reward model that will be very volatile at times. Investing after the model has gone through a rough patch could provide better returns to investors than after a good year.
<a href="http://covestor.com" title="Covestor Investment Management">Covestor Ltd.</a> is a registered Investment Advisor. <a href="http://covestor.com" title="Covestor Investment Management">Covestor Investment Management</a> licenses investment strategies from its Model Managers to establish <a href="http://search.covestor.com" title="Investment Models">investment models</a>. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for <a href="http://search.covestor.com" title="Investment Models">investment models</a> available upon request. Additional important disclosures available at <a href="http://site.covestor.com/help/disclosures">http://site.covestor.com/help/disclosures</a>. For information about <a href="http://covestor.com" title="Covestor Investment Management">Covestor Investment Management</a> and its services, go to <a href="http://covestor.com" title="Covestor Investment Management">http://covestor.com</a> or contact Covestor Client Services at (866) 825-3005, x703.

Puda Coal, Inc. (OTC: <a class="ticker" href="/stock/puda#OTC">PUDA</a>) filed a current report on Form 8-K with the U.S. Securities and Exchange Commission disclosing interim findings of the internal investigation by the Company's Audit Committee, including that, on August 31, 2011, Chairman Ming Zhao, through his counsel, provided the Audit Committee with a letter purportedly from CITIC Trust Co. Ltd. , and that the Audit Committee was unable to verify the authenticity of or the information contained in the "CITIC Letter." 

As previously announced, on September 26, 2011, the Company's Board of Directors received a resignation letter from its then Chief Executive Officer, Liping Zhu, in which Mr. Zhu stated that he provided a false letter from CITIC to the SEC and to counsel for Ming Zhao. On September 29, 2011, the Audit Committee further received a letter from CITIC confirming that CITIC did not issue the "CITIC Letter." 

CITIC also stated that all of the information it had publicly disclosed regarding the CITIC Juxinhuijin Coal Industry Investment Fund No.1 Collective Trust Plan, including the information contained in each of its quarterly management reports and other documents posted on its website, was true and valid, but CITIC did not provide any underlying documents related to the Trust Plan or any other purported transaction between CITIC and the Company's operating subsidiary, Shanxi Puda Coal Group Co., Ltd.

On September 26, 2011, Shearman &amp; Sterling LLP resigned as counsel for Ming Zhao in all regards and stated that the Audit Committee should not rely on any of Shearman's prior statements regarding CITIC. The Audit Committee is not aware of whether Ming Zhao has retained successor counsel. 

Before its resignation, Shearman represented Ming Zhao in connection with the Audit Committee's internal investigation, the SEC's investigation relating to Mr. Zhao, and Mr. Zhao's buy-out proposal. The Independent Committee has not received any recent communication from Mr. Zhao regarding the proposed buy-out transaction, including whether or not he intends to proceed with such transaction.

Puda Coal Audit Committee Announces Receipt of a Letter From CITIC; Ming Zhao's Counsel Resigns  

View <a href="http://alfredlittle.com/2011/09/27/two-sides-to-every-trade-%E2%80%93-a-challenge-to-longs-to-contribute/">here.</a>

Short Sellers

Rumors

Media

General

HRBN

New Alfred Little Blog Post on Harbin Electric, Puda Coal and SilverCorp Metals

On September 23, 2011, the Board of Directors of Puda Coal, Inc. (OTC: <a class="ticker" href="/stock/puda#OTC">PUDA</a>) received a letter from the Company's Chief Executive Officer, Liping Zhu, dated September 22, 2011. The letter states that Mr. Zhu resigns from his positions as the Company's CEO and as a director on the Board. The letter also states that, on August 29, 2011, Mr. Zhu provided a false letter from CITIC Trust Co. Ltd. to the U.S. Securities and Exchange Commission and to counsel for Ming Zhao, Chairman of Puda Coal.

On September 1, 2011, the Company filed a current report on Form 8-K with the SEC disclosing interim findings of the internal investigation by the Audit Committee, including that, on August 31, 2011, Ming Zhao, through his counsel, provided the Audit Committee with a letter purportedly from CITIC, and that the Audit Committee was unable to verify the authenticity of, or the information contained in, the "CITIC Letter." The "CITIC Letter" appears to be the same letter that was referred to in the resignation letter from CEO Liping Zhu.

NYSE to Delist Securities of Puda Coal

On September 1, 2011 the staff of the United States Securities and Exchange Commission informed Ming Zhao, the Chairman of the Board of Puda Coal, Inc. (OTC: <a class="ticker" href="/stock/puda#OTC">PUDA</a>), through a Wells Notice confirming an August 31, 2011 telephone conversation, of the SEC staff's intention to recommend that the SEC file a civil action in federal court against Mr. Zhao, alleging that Mr. Zhao violated certain provisions of the federal securities laws. 

The staff of the SEC has offered Mr. Zhao the opportunity to make a written or videotaped submission setting forth any reasons of law, policy or fact why he believes a civil action should not be brought, or bringing any facts to the SEC's attention in connection with its consideration of the matter.

Puda Coal Chairman Receives SEC Notice of Intent to Recommend Filing a Civil Action Against Him  

The Audit Committee of Puda Coal (<a class="ticker" href="/stock/puda#">PUDA</a>) today announced certain interim findings of its internal investigation, which was launched in response to allegations raised in an article published online by Alfred Little, a short seller of the Company's stock, on April 8, 2011. The summary interim findings of the Audit Committee were disclosed in a current report on Form 8-K filed by the Company with the U.S. Securities and Exchange Commission on September 1, 2011.

Global

After-Hours Center

Puda Coal Audit Committee Announces Interim Findings for Its Internal Investigation

The Securities and Exchange Commission suspended trading in shares of China-based Puda Coal (<a class="ticker" href="/stock/puda#">PUDA</a>) on August 19, due to a lack of current and accurate information on the company. The suspension comes amid accounting fraud charges involving several publicly U.S. traded Chinese companies, whose stock prices have recently fallen sharply.

The suspension will be in effect till September 1.

Puda Coal Halted, Pending SEC Investigation

The Securities and Exchange Commission suspended trading in shares of China-based Puda Coal (<a class="ticker" href="/stock/puda#">PUDA</a>) on August 19, due to a lack of current and accurate information on the company. The stock had resumed trading on Thursday after being suspended since April 11.

The suspension comes amid accounting fraud charges involving several publicly U.S. traded Chinese companies, whose stock prices have recently fallen sharply.

Puda admitted earlier this year there were inconsistencies in disclosures of unauthorized transactions made by Chairman Ming Zhao, involving shares of a business unit. In July, Puda's auditors resigned, saying investors should not rely on the firm's previously issued audit reports. 

The suspension will be in effect till September 1.

Insider Trades

SEC Suspends Trading in Puda Coal Shares

<a href="http://alfredlittle.com/2011/08/19/puda-finally-allowed-to-reopen-for-trading/">Link to Alfred Little blog.</a>

Alfred Little Reports he Covered Short in Puda Coal Yesterday

Puda Coal Spiking Higher on Heavy Volume

Options

Option Alert: Puda Coal August 5 Put Rises 245% as Stock Resumes Trading

Puda Coal Resumes Trading Down 66% from April 11 Close

Puda Coal, Inc. (NYSE: <a class="ticker" href="/stock/puda#NYSE">PUDA</a>) today announced that it has notified the NYSE Amex that it does not intend to appeal the determination from the Exchange to delist the Company's common stock. The Company expects the Exchange to delist the Company's common stock from the Exchange immediately. The Company also expects its common stock to commence trading on the OTC pink sheets market shortly after the delisting is complete. Trading in the Company's common stock on the Exchange has been halted since April 11, 2011.

The Independent Committee of the Board is continuing its discussion with representatives of Chairman of the Board, Mr. Ming Zhao, regarding the preliminary buy-out proposal made by Mr. Zhao on April 29, 2011. The Company's financial advisors in connection with the buy-out proposal, Cowen and Company, LLC and Morgan Joseph TriArtisan LLC, have begun to review documentation and financial information of the Company. 

Given the complexity of the issues involved and the requirement for audited financial statements, the Independent Committee anticipates the proposed transaction, if it proceeds, will take several months to complete. Neither the Company nor the Independent Committee can provide any assurances that a definitive agreement will be executed or approved or that a transaction will be consummated or the timing of such. In addition, the Company's audit committee is in the process of engaging a successor independent accounting firm.

Puda Coal Provides Updates on Listing Status, Buyout Proposal 

Puda Coal to Resume Trading today; Halted Since April 11

On August 4, 2011, NYSE Amex notified Puda Coal, Inc. (NYSE: <a class="ticker" href="/stock/puda#NYSE">PUDA</a>) that the Exchange intends to delist the Company's common stock from the Exchange by filing a delisting application with the SEC pursuant to Section 1009(d) of the NYSE Company Guide. The Staff of the Exchange determined that it is necessary and appropriate for the protection of investors to initiate immediate delisting proceedings. 

The Staff based its decision on the reasons that (i) the Company is subject to delisting pursuant to Sections 134 and 1101 of the NYSE Company Guide in that the Company did not timely file its reports with the SEC; (ii) the Company is subject to delisting pursuant to Section 1003(f)(iii) of the NYSE Company Guide in that the Company or its management engaged in operations which, in the opinion of the Staff, are contrary to the public interest; (iii) the Company is subject to delisting pursuant to Section 132(e) of the NYSE Company Guide in that the Company's communications contained material misstatements or omitted material information necessary to make such communications to the Exchange not misleading; and (iv) the Company is subject to delisting pursuant to Section 1002(e) of the NYSE Company Guide in that the an event has occurred or a condition exists which makes further dealings of the Company's securities on the Exchange unwarranted.

Puda Coal Received Notice from NYSE Amex of Intent to Delist Securities

Puda Coal, Inc. (NYSE: <a class="ticker" href="/stock/puda#NYSE">PUDA</a>) today announced that on July 15, 2011, the Company submitted to the NYSE Amex (the Exchange) a plan to regain compliance with certain of the Exchanges continued listing standards. The Exchange originally required the Company to submit a plan of compliance by July 5, 2011 and subsequently extended the submission deadline to July 15. The Company can provide no assurances that the plan will be approved by the Exchange. 

On July 13, 2011, the Independent Committee of the Board received a draft merger agreement from Chairman of the Board, Mr. Ming Zhao, pertaining to the preliminary buy-out proposal made by Mr. Zhao on April 29, 2011. Although it is expected that evaluation and negotiation of the draft agreement will take at least several weeks, neither the Company nor the Independent Committee can provide any assurances that a definitive agreement will be executed or approved or that a transaction will be consummated or the timing of such. The Company will provide no other updates regarding the proposed buy-out until there is a material development.

Puda Coal Submits Plan to Regain Compliance with NYSE Listing Standards

UPDATE: Puda Coal: Fincl Statements In Question For FY09, FY10

By letter dated July 7, 2011, the independent registered public accounting firm of Puda Coal, Inc. (NYSE: <a class="ticker" href="/stock/puda#NYSE">PUDA</a>), Moore Stephens, resigned, effectively immediately. Moore Stephens served as the Company's auditor since July 19, 2005. 

Moore Stephens also advised the Company that further reliance should no longer be placed on its previously issued audit reports relating to the Company's financial statements for fiscal years 2009 and 2010. The resignation and non-reliance advice by Moore Stephens are based on its conclusion that it is no longer able to rely on the representations of the Company's management received in connection with its audits of the Company's financial statements for the last two fiscal years. 

Moore Stephens believes such management representations are materially inconsistent with the alleged unauthorized transfers of subsidiary ownership by the Company's Chairman, Mr. Ming Zhao, which are currently subject to the investigation by the Audit Committee. The Company's Audit Committee will continue its investigation into the alleged unauthorized transactions.

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