China Green Agriculture Shares Plunged: What You Need to Know

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: China Green Agriculture (NYSE: CGA  ) shares fell 12% in trading late Monday.

So what: Today, law firm Brower Piven filed a lawsuit on behalf of purchasers of China Green Agriculture stock. This follows news last week that another firm, Hagens Berman, was investigating allegations that the company made "false and misleading statement to the US SEC."

Now what: Allegations center around material differences between statements filed with Chinese and U.S. authorities. When allegations like this start flying around, it’s never good for shareholders. This Fool doesn’t like to panic-sell, but I would stay away at least until these allegations get cleared up ... which could be a long time.

Interested in more info on China Green Agriculture? Add it to your watchlist.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw

China Green Agriculture is a Motley Fool Global Gains recommendation. The Fool owns shares of China Green Agriculture.

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Read/Post Comments (9) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 25, 2010, at 5:20 PM, FoolishNadz wrote:

    CGA was a stock chosen by Global Gains China last year in 2009 and was highly recommended!

    This was the only Chinese Stock that I invested in after carefully studying its growth prospects and recommendation by FOOL.

    Now we have these law suits, I mean common!! I have sold all of my CGA stock as of today and just live with the losses, there are firms you can apply to piggy back on the law suit and supposedly claim some of the losses depending on the outcome, until then there is a limbo and you don't want to hold onto the stock while its getting battered day in and day out by shorters! - My Foolish Advice!

  • Report this Comment On October 25, 2010, at 5:35 PM, jlacroix wrote:

    Another MDP pick bites the dust!

  • Report this Comment On October 25, 2010, at 5:53 PM, prose976 wrote:

    I believe the latest scam is to attack all the small cap Chinese firms. True, they have all been pumped to the point of ridiculousness, but they may be coming into actual valuation range at this point (i.e. CHBT, CGA, YONG, etc.). There is alot of money to be made on both ends for the law firms and those who are prompting these outcries of fraud. Think about it. The same "investors" who are bringing the lawsuits forward have already made 200-400% gains in these companies. Now, with the advent of a lawsuit, they are pile-driving the stock valuations of these same stocks, selling off their shares, driving prices down further, taking the gains and then waiting for others to dump their shares, driving prices down further, most likely taking out short positions all along. So they make 200-400% on the way up, start taking gains and buying short positions. Push the price down and make 50% or more on the way down from their short positions, then cover their shorts at a drastically reduced price to ride it back up 50% or so. That's a heck of a way to do business, but it works, and the very wealthy are taking the weak-stomach investors for some serious roller-coaster rides these days with emerging market stocks. That's just my take on the situation. I'm not a lawyer nor do I proclaim to have specialized knowledge in any area commented here. But it's a very tricky environment out there and the retail investor is prime pickings for the practice of pump, dump, short, buy ride and profit.

    That being said, the MF crew went to China and that has recommended CGA for three years. The issue is one of professional integrity and all should be brought to light quickly.

    If Hanson and company were lied to or given fraudulent information they should own up to their mistakes. MF is a class operation so I´m certain there is no dishonesty involved with the Global Gains team. But MF should act quickly, perhaps send a team there and issue a statement regarding the very serious allegations.

  • Report this Comment On October 25, 2010, at 6:01 PM, jeppes wrote:

    Its hard to say how this one will go, it could be a short scam and it could be accurate... Anyone remember ENRON?? Its fairly sad that when Investors and Lawyers get together and decide to do something like this, you really have no idea to what end... They bagged a fairly large Lawyer down in Florida with a good sized Ponzi scheme; I wish the bad guys wore signs... Good Luck

  • Report this Comment On October 25, 2010, at 7:38 PM, DSquaredInv wrote:

    I second prose976. MF GG needs to dig into this and get a fact-based recommendation out to us ASAP. What I read on the boards is all speculation and wishfull thinking. A premium service needs to work on both ends of the sale to keep the trust of long term subscribers.

  • Report this Comment On October 25, 2010, at 9:01 PM, john795806 wrote:

    To be fair, MF Global gains team noted some time ago that CGA used a less-known accounting firm than did YONG, another Chinese fertilizer producer. They also noted CGA's lame excuse for having a lesser-known accounting firm, something along the lines of-- "We just haven't gotten around to hiring a better one, we're sooo busy." Doh! Does it take any longer to hire a reputable firm in the first place? I would have expected some follow-on questions after such a lame answer.

    CGA was slammed several weeks ago by a report noting several accounting anomalies, but it recovered. Then, the first lawsuit took it down another notch or two. Now this. The lesson is that it's a good idea to follow the news on your stocks. Motley Fool isn't going to necessarily do it for you.

  • Report this Comment On October 26, 2010, at 11:05 AM, sofpan wrote:

    Please Motley Fool's Team has to answer formally to my request about CGA:

    http://caps.fool.com/Ticker/CGA.aspx

    Beside the accusations that is difficult for someone to take place, Fool's Team had gone and saw with their own eyes CGA's factories.

    In an article of Seeking Alpha, someone claims that CGA's factories are "fakes". And has pictures. In this one, Fool's team can take position.

    I'm waiting for Fool's answer.

  • Report this Comment On October 27, 2010, at 11:05 AM, drgood wrote:

    Does MF have an official posture at this time on 10/27/10 to buy, hold, sell?

  • Report this Comment On October 27, 2010, at 12:18 PM, TMFTurtle wrote:

    If you subscribe to GG, Tim Hanson provided some insight into the situation on the GG boards: http://boards.fool.com/1106/in-a-nutshell-it-accuses-cga-of-....

    While this lawsuit has certainly affected the stock, the validity of the lawsuit itself remains to be seen.

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