May 31, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Chinese fertilizer manufacturer Yongye International (Nasdaq: YONG ) were surging today, gaining as much as 64% in intraday trading on heavy volume.
So what: Yongye has been one of the many Chinese reverse-merger companies to have come under fire from short-sellers alleging impropriety. Today, however, investors got a huge confidence boost as the company issued press releases saying that Morgan Stanley's (NYSE: MS ) private equity arm will be investing $50 million in the company, while Yongye's CEO said he will purchase up to $3 million in Yongye stock.
Now what: Investors are betting today that Morgan Stanley did the due diligence on this investment, something that eluded Goldman Sachs (NYSE: GS ) with the IPO of Longtop Financial (NYSE: LFT ) , Hank Greenberg's Star Investments when it took a stake in China MediaExpress, and the overseas branches of the big four auditing firms when signing off on the books of a variety of now-foundering companies. The confidence that both Morgan Stanley and Yongye's CEO are showing through these investments may be the primary ingredient in the stock's jump today, but investors shouldn't overlook the fact that the $50 million that Morgan Stanley is pumping in will give Yongye significant resources to continue to expand its business.
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