Sell AutoChina: Many Questions (And Risks) Remain

China Analyst Ralph Arroyo submits:

I have watched AutoChina (AUTC) and The Forensic Factor's (TFF) public dialogue with interest (the links to the articles and responses are at the bottom of this article). TFF unearthed some interesting and poignant concerns on accounting, capital, dilution, related party transactions, and management background. However, management's response was quick and thoughtful. TFF must have really struck a cord because in a shareholder friendly move, AutoChina's Chairman and CEO agreed to revise the earnout hurdles that could limit dilution over the next few years.

I applaud the move, as I believe it was required for investors to revisit the shares. However, I thought it was disingenuous to include 2010 revised hurdles a month and a half after 2010 ended, especially since the hurdle was set well below analyst estimates. Clearly, management should be commended for its actions, but that does not make AutoChina a good investment.

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