Orient Paper, Inc. ONP
Muddy Waters reaffirms ONP is a fraud: SAIC-filed PRC financials, impossible equipment claims, and bogus acquisitions contradict ONP's SEC filings; Strong Sell.
Thesis
Muddy Waters issues a follow-up letter rebutting ONP's June 30, 2010 press release which alleged MW reviewed the wrong PRC entity. MW confirms it reviewed 河北省保定市东方造纸有限公司, the same HBOP referenced in ONP's own SEC Exhibit 10.5, and reiterates its Strong Sell rating. The local AIC-filed 2008 financials bearing Chairman Zhenyong Liu's personal seal show only RMB 16.3m ($2.4m) revenue and a net loss — wildly inconsistent with ONP's SEC filings and with a balance sheet later posted online. Additional fraud markers: a $27.8m corrugating line that domestic manufacturers say cannot exist, a $13.6m acquisition of Shuang Xing whose assets were worth under $400,000, implausible top-10 customer churn alongside 62.5% revenue growth, and inventory turns of 32.5x vs. industry leaders at 4.3–7.7x.
SCQA
Orient Paper (ONP) is a US-listed Chinese reverse-merger paper company whose operating subsidiary HBOP's reported financials and assets underpin its equity value.
ONP's June 30, 2010 press release claimed Muddy Waters studied the wrong entity; MW's files confirm the identical HBOP referenced in ONP's own SEC 10-Q, and PRC AIC filings show a fraction of the reported revenue.
Reiterate Strong Sell on ONP: the SAIC-sealed financials, impossible equipment prices, bogus acquisitions, and implausible customer churn collectively establish ONP is a fraud.
Short position gains as the price of ONP declines toward fundamental value; no explicit target price disclosed in this follow-up letter.
The three reasons
- 1
SAIC-filed 2008 financials show only $2.4m revenue vs. reported tens of millions
- 2
Claimed $27.8m production line is physically impossible per Chinese manufacturers
- 3
Shuang Xing acquired for $13.6m had assets worth no more than $400,000
Primary demands
- Sell ONP shares (reiterate Strong Sell rating)
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (2)
Notes
Four-page text-only follow-up letter responding to ONP's June 30, 2010 rebuttal of Muddy Waters' initial Strong Sell report. No charts, no images, no branding — a Word-style memo defending MW's China entity identification and repeating the fraud case with SAIC-filed evidence. Best treated as a research_note follow-up rather than a full deck. Narrative value is high as a specimen of Muddy Waters' early-era rebuttal rhetoric (bilingual document references, Chinese company name inline, AIC-filing forensics); visual/craft value is minimal.