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What: Shares of Longtop Financial Technologies
So what: Longtop shares crashed hard last week when Citron Research issued a scathing report on the company, then climbed back quickly when the company addressed Citron's concerns. Last night, investors were reminded of Citron's accusations as Longtop CFO Derek Palaschuk abruptly resigned from the board of directors of pre-IPO firm Renren, where he chaired the audit committee. Reuters says he did this to shield Renren from whatever fallout the Citron report might bring.
Now what: Longtop is taking some serious steps to combat Citron's allegations, such as doubling its share buyback and focusing its impact even further by cutting the window during which those buybacks will take place. If everything is on the up and up, these depressed shares should spring back to life when the storm blows over. But a brand-busting scandal would sink the shares even further. The investment thesis here comes down to this simple question: Do you trust Longtop's management?
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