Hall of Shame

Financials

Wins Finance Holdings Inc. (WINS US)

Year: 2020

Wins Finance Holdings Inc. is a holding company. The Company is an investment and asset management company, and is an integrated lending solution provider serving small-and-medium sized enterprises (SMEs) in Jinzhong City, Shanxi Province and Beijing, China. The Company is engaged in providing financial services in the People's Republic of China (PRC) domestic market. It offers principal products and services to its customers, which primarily constitute SMEs, such as financial guarantees, financial leasing, and financial advisory and agency services. Its operations and assets are primarily located in the PRC. It makes short term investments in asset management products issued by banks and financial institutions with original maturities of over one, three or five years. It acts as a guarantor both to access and share credit risks. It provides a range of financial consultancy services, including investigation, research, and locating the source of financing and closing of financing.

The origins of Wins Finance as a publicly listed company start with Sino Mercury Acquisition Corporation (SMAC), which was formed as a special-purpose acquisition company. SMAC had been established and listed on the Nasdaq in 2014. The intention of forming the shell company was to raise money and serve as a backdoor for a Chinese company in the non-traditional financial sector to become listed in the US. SMAC's August 2014 IPO on the Nasdaq would raise $40 million.

Wins Finance was the target Chinese company acquired by SMAC in 2015 with the merged entity taking the name of Wins Finance. It started trading on the Nasdaq in October 2015. The main subsidiary of Wins Finance was Shanxi Dongsheng Finance Guarantee, which was founded in 2006, but the leasing business started in 2009.

Seeking Alpha
December 9, 2016 Anthony Thorpe published an article on Seeking Alpha "Wins Finance Holdings Is Overvalued: 75% Downside". In summary he said:-

  • Stocks that go up 1,400 percent in a year without any fundamental reason tend to come crashing down.
  • Wins Finance Holdings is managed by a CEO with a history of destroying shareholder value.
  • At a very conservative valuation, WINS has 75 percent downside.

December 12, 2016 Anthony Thorpe published another article "Wins Finance And The Case Of The Missing Headquarters". In this article he raised the following issues:-

  • According to an investor who did an on-site visit, Wins Finance is not located at the address that it claims to be at.
  • The CFO was the financial controller of Agria Corporation, a company that had its stock delisted because of stock manipulation.
  • Calls to Wins Finance resulted in a recording stating that I needed an app called Line2 in order to contact the company.

February 2, 2017 Another blogger, Air Seller, on Seeking Alpha wrote an article "Potential Chinese Fraud - Wins Finance Holdings". The article noted that the catalysts which could cause the stock to go to $0 were:

  • Market should eventually recognize that WINS is overvalued based on valuation and recent 93% discount (to current market price) purchase of a controlling stake by a public company.
  • Possible lawsuits / SEC investigations of manipulation by insiders and management would lead to a sharp selloff.
  • There's an ongoing risk that someone like Muddy Waters or Citron Research could hit the stock with a negative report.
  • Vesting/exercise of insider stock options by management should cause shares to sell off.

August 4, 2017, the Company received a delisting determination letter from the Nasdaq Stock Market LLC. Nasdaq said its decision is related to WINS’s failure to meet the 300 round lot shareholder requirement. The Company said it planned to appeal the ruling.

October 20, 2017 Nasdaq withdrew its Aug. 4 delisting determination on the stock, but requested more information from the company.

November 18, 2019 the Company received a notification letter from NASDAQ stating the Company was not in compliance with NASDAQ Listing Rule, due to its failure to timely file its Annual Report for the year ended June 30, 2019.  The NASDAQ notification letter provided the Company 60 calendar days from the date of the notification, or until January 17, 2020, to submit a plan to NASDAQ to regain compliance with the NASDAQ's continued listing requirements.  The company submitted a plan on January 20, 2020.

May 22, 2020 The Company received a delisting determination letter from NASDAQ because it still had not filed its 2019 Annual Report. The company appealed and NASDAQ granted an extended stay as to the suspension of the Company's ordinary shares from trading pending the Company's scheduled hearing before the Nasdaq Hearings Panel on July 2, 2020 and the issuance of a final Panel decision.

Hindenburg Research
June 17, 2020 Hindenburg Research published a report "Losing With WINS: NASDAQ’s Latest Disgrace Has No Financials, An Insolvent Parent Entity and Is Embroiled in What Appears to Be an Obvious Pump and Dump".   Hindenburg noted that Win Finance was currently listed on NASDAQ despite having:

  • no current Financials; The last available financials were as of 18 months ago (December 2018).
  • no CFO; Hindenburg believe the CFO resigned 6 months earlier 
  • undisclosed legal judgments; Chinese courts rendered an RMB350M asset freeze on Wins’ operating subsidiary.
  • a headquarters that is almost entirely empty,
  • a history of major trading irregularities and alleged fraud; June 2017 stock spiked 4500%, for no reason, before crashing, again on June 10, 2020 stock up 758% on no news what so ever.
  • an auditor that has a history of ‘auditing’ China-based total blow ups, and
  • a parent in undisclosed insolvency.

In conclusion Hindenburg said that as the company's, with no CFO, July 2 deadline to file financials approached, it believed it was simply putting of the inevitable – disclosing the precarious position it was in – while the stock pumped one last time to perhaps help stakeholders exit on the way out.  In sum, it thought that Wins Finance was a company that was already worthless and the market would soon figure that out.

June 18, 2020 Wins Finance received a letter from the Listing Qualifications Department of Nasdaq stating the Company was no longer in compliance with Nasdaq's audit committee requirement due to the resignation of Mr. Shihai Wang from the Company's board of directors and audit committee on June 15, 2020.


Seeking Alpha: Wins Finance Holdings Is Overvalued - 75% Downside, 9 Dec 2016
Seeking Alpha: Wins Finance And The Case Of The Missing Headquarters, 12 Dec 2016
Seeking Alpha: Potential Chinese Fraud - Wins Finance Holdings, 2 Feb 2017
Bloomberg: Chinese Stock That Rallied 4,555% Could Get the Boot From the Nasdaq, 10 Aug 2017
Hindenburg Research: Wins Finance - Losing With WINS, 17 Jun 2020
Wins Finance: Annual Report, YE Jun 2018
Wins Finance: Annual Report, YE Jun 2017


 


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