China New Borun (BORN) Continues Run of Highly Unusual Activity

Jacob Harper  |

Chinese edible corn alcohol distiller China New Borun (BORN) skyrocketed in early trading on Nov. 11 for no apparent reason, the second time this month the company’s shares have done so.

While conditions for the spirits company have improved, with corn prices in China expected to drop and corn supply to increase, the sudden spikes in the company’s valuation have been suspect to say the least. The last inexplicable rise in the price of the company’s shares on Oct. 15 triggered an exploratory call from the New York Stock Exchange. Citing company practices, China New Borun declined to comment on the matter.

Following the stock rise, China New Borun corrected, losing nearly all the gains experienced in the stock pop. Those gains have been re-realized in this second major bump in less than four weeks.

China New Borun had been experiencing a down year, reporting a string of disappointing earnings. While China New Borun is expected to increase production and diversify into other arenas, the company’s oddly positive stock performance as of late has raised eyebrows in the investment community.

China New Borun’s accountant cannot be inspected by the US’ Public Company Accounting Oversight Board, and in 2010 short seller Citron Research outright accused the company of engaging in fraud by hiding debt and changing their website to conceal investor relation documents.  

On the month, China New Borun posted 35.39 percent volatility, making it the second-most volatile stock on the American market in the last 30 days. Only VisionChina Media Inc. (VISN) experienced less stability in that time frame.

The company reports third quarter earnings on Nov. 14, which should illuminate the company’s highly unusual activity.

China New Borun rose 23.6 percent in midday trading to hit $2.20 a share.

(image courtesy of Wikimedia Commons)

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