OLP Global Highlights More Red Flags On CNInsure (CISG)

April 13, 2011 8:38 AM EDT
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OLP Global highlights significant red flags on CNInsure Inc. (Nasdaq: CISG) related to e-commerce acquisition and recent initiative of RMB 500 million investments.

Analyst Adele L. Mao states: "In our view, CISG's recent RMB 500 million investment in e-commerce is highly questionable. We found it perplexing that management decided to build an independent e-commerce platform, while CISG supposedly owns 65.1% of InsCom, an existing e-commerce platform the company acquired in July 2010 for RMB 84 million in cash plus an undisclosed amount of assets. Interestingly, our due diligence shows that CISG doesn't even have ownership in InsCom eight months after the acquisition. Instead, CISG's head of P&C business (Mr. WANG Chunlin) owns 95% InsCom through his personal ownership in Shenzhen Xinbao, an entity created in June 2010. Records show that Mr. WANG acquired his indirect 95% ownership in InsCom for merely RMB 28,500 on December 3, 2010, representing a discrepancy of epic proportion. To our surprise, this took place after we raised issues regarding CISG's acquisition practice, gross margin structure, as well as the treatment of "Quan Yi Zheng."

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