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Harbin Electric Shares Popped: 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: Shares of Chinese electric-motor manufacturer Harbin Electric (Nasdaq: HRBN  ) built on strong gains on Friday with a massive jump today, tacking on as much as 73% in intraday trading on heavy volume.

So what: Harbin's shares had been torpedoed by a critical report from short seller Citron Research, but they made a bit of a comeback last week after the company refuted Citron's claims. Today, the stock was flying high thanks to a press release saying that Harbin had entered into a definitive merger agreement that would have the company bought out by its chairman and private-equity investor Abax Global for $24 per share.

Now what: Should this buyout go through, it would be a severe blow to skeptics who have sold Harbin's stock short. The stock has already posted hefty gains, but it would still have to rise an additional 70%-plus to reach the buyout price. What does it mean that Harbin's still trading so far below that price? Essentially, investors remain very skeptical that the deal is for real.

I won't jump on this gamble, but over the coming six months or so -- the deal is expected to close in the fourth quarter -- investors on one side of this bet will likely make a killing.

Want to keep up to date on Harbin Electric? Add it to your watchlist.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

Read/Post Comments (2) | 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 June 20, 2011, at 4:22 PM, john795806 wrote:

    What TMF doesn't seem to get is that the shorts have already made their killing, and on both sides. They drive the stocks down right before options expiration date (this week, June 18th), and cash in on all of their puts. Did you notice that July calls were being purchased en masse at the same time? Meaning that the shorts were counting on driving the price down, cashing in at the low price, investing immediately in puts, and profiting on the stocks bounce-back. Too predictable.

  • Report this Comment On June 20, 2011, at 4:45 PM, stosselgg wrote:


    I agree that there is a foul smell in the air regarding this whole Harbin/Citron business. The real question remains from what direction is the stench coming?

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Related Tickers

11/1/2011 4:00 PM
HRBN.DL $23.30 Down +0.00 +0.00%
Harbin Electric, I… CAPS Rating: *