Alfred Little submits:
Chinese RTO Puda Coal, Inc (PUDA) Chairman Ming Zhao transferred the ownership of PUDA’s sole Chinese operating entity, Shanxi Puda Coal Group Co., Ltd (“Shanxi Coal”), to himself in 2009 without shareholder approval according to official government filings. Then, in 2010, Zhao sold 49% and pledged the other 51% of Shanxi Coal to CITIC Trust Co., Ltd (“CITIC”), a Chinese private equity fund, for RMB245 million ($37.1 million).
Zhao then recklessly leveraged Shanxi Coal by borrowing RMB3.5 billion ($530.3 million) from CITIC at an incredibly high 14.5% annual interest rate (including fees) to finance the development of its coal mines. PUDA shareholders are completely unaware of these transactions that decimate the value of its U.S. listed shares.
Background – An Industry Facing Government Mandated Consolidation
According to PUDA’s 2010 10-K filing:
In order to improve production efficiency, workplace safety and to reduce coal mine accidents, the Shanxi provincial government issued