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Chart of the day: TSTC collapse

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disappopint November 15, 2011 (Chinavestor) Telestone Technologies (NASDAQ:TSTC) tumbled as much as 25% this morning before regaining some of lost ground. The stock is still down over 20% after one hours of trading. Reason: the company reported disappointing quarterly results.

TSTS_2011Q3

What I found interesting is two totally different interpretation of what's happening by different gropup of people.

One group is long on Telestone Technologies (NASDAQ:TSTC) and called me up just yesterday, one day before earnings, drawing parallel to China Grentech (NASDAQ:GRRF), a company that went gangbusters following news that it will go private. This source strongly suggested that Telestone Technologies (NASDAQ:TSTC) will follow suit and it may go as high as $20/share.

Another set of people consider Telestone Technologies (NASDAQ:TSTC) a big scam, similar to Rino Int. (PINK:RINO). Thir reasoning is well articulated in the following article: http://seekingalpha.com/instablog/1054739-morrison-security-research/230781-telestone-technologies-nasdaq-tstc-the-most-dangerous-chinese-reverse-merger.

It is not easy to navigate among Chinese stocks these days. I can't stress strongly enough to pay attention to the following factors, we laid out back in our July 2011 Newsletter: Chinese reverse mergers fail investors

These factors are:

  1. the way Chinese company got listed in the U.S.: IPO or reverse merger
  2. lack/presence of institutional investors
  3. quality of auditor
  4. respectable or not IR firm

As a matter of fact, there is at least one link between RINO and TSTC. Investor relations firm HC International (now MZ Group,  www.mz-hci.com) was grooming both Rino Int. and Telestone Technologies before the first went bust.



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