Wednesday, June 1, 2011

Bain & Morgan Stanley...what are you doing!?

Bain Capital has made a buy out offer for Chinese Fire & Security (CFSG) and I am scratching my head.  If you read the company's 10K, red flags pop up all over the place. John Hempton at Bronte Capital, has done an excellent write up here. Just look at their odd cash flows and you see red flags.

[caption id="attachment_189" align="aligncenter" width="640" caption="Net Income and Cash Flows are wildly different"][/caption]

Now I just read yesterday that Morgan Stanley Private Equity Asia division is making a 50 million dollar investment in YongYe International. Again, YongYe has the same suspicious accounting. Absaroka has done a good write up for it here.  Here is a look at YongYe's cash flows:

[caption id="attachment_192" align="aligncenter" width="640" caption="Large difference between net income and cash flow from operations"][/caption]


Personally I don't get it. I mean, these are supposed to be the smart investment banker types. The kind of dudes who probably wouldn't talk to me on the street (I dress like a bum).  Yet....I think they are going to get a huge goose egg.

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