As has been said on countless occasions there are two sides to a story and the truth can usually be found somewhere in the middle. Unfortunately for Advanced Battery Technologies (PINKSHEETS: ABAT) the truth, even if it aligns itself with the company, may not be enough to restore investor confidence and alleviate fears. A target of a number of articles claiming improprieties ABAT has seen shares plummet since hitting a 52-week high of 4.04 last December. On Wednesday shares sank to a 52-week low of 0.32 after opening the day at 0.70 and judging by the trading activity it doesn’t look as if ABAT has any defense for the onslaught.
The negative press surrounding ABAT has been well documented with many purporting the company has falsified revenue reports, claimed distribution channels that don’t exist, transferred ownership of a vital subsidiary without explanation or compensation, and the list of allegations goes on.
On their end ABAT maintains they have done nothing wrong, they remain a developer, manufacturer, and distributor of rechargeable PLI battery cells that use lithium cobalt oxide anodes and are designed for use in electric vehicles, mine lamps, walkie-talkies, and consumer electronics, including cellular telephones, laptop computers, and digital cameras. According to ABAT the lithium cobalt oxide anodes used in their PLI batteries gives them a competitive advantage over other types of rechargeable batteries.
Competitive advantages aren’t at the center of the storm right now; the focus is ABAT’s business operations.
ABAT hasn’t exactly done themselves any favors as evidenced by their response to NASDAQ’s request for confirmation regarding financial claims. Less than two weeks ago ABAT received a letter from NASDAQ informing them that they had failed to satisfy listing rules, specifically “cash confirmations from the banks holding the Company’s funds prepared in the presence of personnel employed by the Company’s independent audit firm” and “the Company failed to file its Quarterly Report on Form 10-Q for the period ended September 30, 2011.”
Making matters worse for ABAT was NASDAQ’s decision to delist their common stock “based upon public interest concerns raised by the Company’s deliberate refusal to provide the requested bank confirmations.” Obviously this wasn’t a simple matter of a share price not meeting the minimum $1 level for 30 days; the issue is much more serious.
ABAT opted to remain relatively silent about the negative press and as for their failure to file their Form 10-Q they only said it “could not be filed within the required time because there was a delay in completing the procedures necessary to close the books for the quarter.” Of course that could have been because their CFO decided to resign from her position in October “in order to attend to personal matters.”
That relative silence ended on November 28, 2011 when ABAT’s Chairman, Zhiguo Fu, issued a letter to shareholders painting the company as a victim “afflicted by the concerted actions of a group of short sellers.” He went on to say, “After establishing short positions on our shares, they published a series of articles making allegations of misconduct by ABAT’s management that were fabrications and distortions.”
In the eyes of ABAT it was the “fabrications and distortions” created by these short sellers that triggered the NASDAQ investigation. ABAT then played the Chinese card, accusing NASDAQ of targeting them because of the location of their business. In his letter to shareholders Zhiguo stated “At the end of the summer, however, as stories circulated regarding collusion between a small number of Chinese companies and their bankers, NASDAQ decided that, solely because we are Chinese, we should be required to provide an extraordinary level of confirmation from our banks. Despite the lack of any evidence of wrong-doing on our part, NASDAQ insisted that we approach our banks, inform them that our U.S. regulators consider them untrustworthy, and ask them to permit our auditors to “look over their shoulders,” as it were, while they prepare bank confirmations. Initially NASDAQ insisted that this degrading procedure be conducted at the highest level of the bank.”
Zhiguo then insisted that ABAT’s former CFO resigned because “The pressure brought by the short sellers, class actions and regulators caused her to decide she should devote her time to ailing members of her family.” He then tells shareholders “I myself have had to seek medical assistance for the effects on my health of this assault on our integrity and our efforts at being good U.S. corporate citizens.”
Unfortunately for ABAT the letter has done nothing to help the company’s cause, that being to alleviate investor fears. By throwing in personal opinions and feelings Zhiguo failed to address the real problem and offer solutions that shareholders want to hear. If anything he actually signed the company’s death certificate when he stated “Today, unfortunately, I have lost confidence in the integrity of the U.S. capital markets, as I see how the reckless actions of a few persons have negated all of our good efforts.”
In an odd twist he then followed that doomsday outlook with “But I remain committed to our shareholders. I believe that their faith in our company should be rewarded.” The sad thing is it’s not faith that ABAT shareholders have, it’s an overwhelming sense that their position is virtually worthless.