Description

Apparently there are still (some) people who can be persuaded that Chinese real estate is on the upward slope of a bubble – at least enough to pump up the price of a relatively low float US-listed Chinese stock.  Once the market cap hit $4 billion this really got our attention since there are limits to how large empty shell companies can really get. 

Yangtze River Development Limited (NASDAQ: YERR), through its subsidiary, Wuhan Yangtze River Newport Logistics Co., Ltd., primarily engages in the real estate and infrastructural development business in China. It operates Wuhan Yangtze River Newport Logistics Center, a port logistics project located in Wuhan, Hubei province of China. The company is headquartered in New York, New York.

Formerly this was known as Kirin International Holding, Inc. (OTCPK:KIRI) and has been floating around the public markets since 2011 on the OTCPK exchange with several attempted promotes over time

https://seekingalpha.com/article/3367645-kirin-international-holding-inc-highly-promoted-and-highly-dangerous

This time given the frothy market conditions they managed to get it to stick high enough to uplist to Nasdaq which has made it finally a shortable opportunity (albeit with a high borrow cost).

Most brazenly the company listed a $300mm shelf registration that I expect they are tapping as we speak to unload equity with an ATM.

Before getting into the project in any detail, let’s look at the cast of characters:

1)      Joseph M. Lucosky and John O’Leary of Lucosky Brookman LLP as acting the legal advisor to the company.

Their 5 most recent clients – in order with no filtering for performance

Meridian Waste Solutions, Inc.: Stock $1.38 down 90% in last year

Akers Biosciences, Inc. Stock $0.75 down 75% in last year

BlueFire Renewables, Inc. Stock $0.0014 (!!) down 50% in last year

MusclePharm Corporation Stock $1.27 down 50% in last year

MagneGas Corporation Stock $0.63 down 90% in last year

2)      Numerous small time paid stock promoters have been pumping the stock for years with a big recent push

THE PROJECT:

https://www.google.com/maps/search/Wuhan+Yangluo+Economic+Development+Zone/@30.6994883,114.5497085,1564m/data=!3m1!1e3

That empty swampy area next to the river has been on their balance sheet for over $300mm for the last 6 years – glory shall rain upon us soon (or not).

172mm shares out.

$95,000 cash in the bank (!)

$195mm in liabilities

$16.34 up from $4 in May and now over the mountain of $23 last week.

Expensive borrow but it is available

No institutional interest, relatively low float

Chinese insiders hold over 75%

The idea is to build a mega project (some great stock art on the website of it!)

Some examples of how professionally run this organization is in the most recent 10Q:

1.1 Armada transaction

On October 6, 2016 and November 23, 2016 the Company, by and among Armada Enterprises GP (“Armada”) and Wight International Construction, LLC (“Wight”), entered into (i) a Contribution, Conveyance and Assumption Agreement (“Contribution Agreement”) dated October 3, 2016 and its first and second addendums and (ii) an Amended and Restated Limited Liability Company Agreement dated November 16, 2016 (collectively with the Contribution Agreement, the “Agreements” or “Transaction”), whereby the Company acquired 100 million preferred B membership units, which will be ultimately converted into 100 million LP units in Armada Enterprises LP and in exchange, the Company issued a $500 million convertible promissory note (“Note”) and 50,000,000 shares of the Company’s common stock to Wight. As result of the Transaction and the conversion of the Note on November 17, 2016, Wight owns 100,000,000 shares of the Company’s common stock representing 36.73% of the Company’s voting power; the Company owns 100 million preferred B membership units in Wight representing 62.5% non-voting equity interest in Wight.

Under the terms of the Transaction, at the first closing, Wight was required to provide an aggregate total of $200 million, consisting $50 million in Working Capital and $150 million in Construction Funding, to the Company by January 18, 2017. Wight did not provide the funding on January 18, 2017 and the Company gave Notice of Default and Request for Cure. Wight proposed to provide $50 million in Working Capital on or before February 15, 2017 and secure $150 million in Construction Funding on or before March 15, 2017. Wight failed to provide the $50 million in Working Capital as proposed by February 15, 2017. Therefore, the Company, on February 24, 2017 determined to terminate the Transaction for non-performance by Wight pursuant to the Agreements executed among the Company, Armada and Wight. Pursuant to the Agreements, the termination of the Transaction calls for the immediate return of the 100,000,000 shares of common stock issued by the Company to Wight. On February 27, 2017, the Company issued a Notice of Termination to Wight and demanded the return of the 100,000,000 shares of common stock according to the Agreements. The Company reserves the right to pursue any further legal action with respect to Armada and Wight’s default.

Under the terms of the Armada Agreement, at the first closing, Wight was required to provide an aggregate total of $200 million, $50 million in Working Capital and $150 million in Construction Funding, to us by January 18, 2017. Wight did not provide the funding on January 18, 2017 and we gave Notice of Default and Request for Cure. Wight proposed to provide $50 million in Working Capital on or before February 15, 2017 and secure $150 million in Construction Funding on or before March 15, 2017. Wight failed to provide the $50 million in Working Capital as proposed by February 15, 2017.

On February 24, 2017, due to Wight’s nonperformance and nonpayment of $50 million for the First Financing, the Company decided to unwind Armada Financing. Pursuant to Armada Agreement, the termination of the Armada Agreement calls for the immediate return of the 100,000,000 shares of common stock issued by the Company to Wight. On February 27, 2017, the Company issued a notice of termination of contract to Wight. As at March 1, 2017, the Company cancelled the 100,000,000 shares of common stocks issued to Wight.

Catalyst

$300mm shelf outstanding - will be tapping equity market for dilution soon

Stock has cracked from its peak (finally) - with a $3bb+ market cap