Last Thursday Citron Research, known for excellent short biased picks, issued a bearish report on Harbin Electric (HRBN) and shares literally fell off the planet. Already down from the $17 range 4 days earlier HRBN took a nose dive from $14.32 to $5.82 or a 60% nose dive.
Citron’s believes that the SEC should halt HRBN because “Harbin’s stock price is currently propped on the crutch of a purported $24 buyout offer from its Chairman / CEO, which Citron believes is a sham.”
Now don’t misunderstand my blog post here, there are few better than Citron at snuffing out scams, however, it does appear this mornings news could do damage to those who shorted shares Thursday or Friday and held onto them in hopes of a halt. At least in the short term or for those who panic.
I tend to agree with Citron but missed their alert Thursday, so I’ll use this as an opportunity to short into the spike because if it is a fraud, this morning’s PR only gives the SEC more ammunition to halt the security.
I’m sure a number of shorts already cashed in big on Friday, evident by the bounce, but greedy shorts stand to get screwed big time this morning on news that the company, HRBN, has entered into a merger agreement to be acquired at $24.00 in cash.
As you can imagine, news like this will bring a rush of buyers with Friday’s close being $8.39. Add to that a massive short squeeze and there is definitely a warfare trade to be had here today in addition to many valuable lessons to be learned that we’ll cover in another blog post down the road.