There has been a keen level of bullish option trading interest in Origin Agritech, the China-based producer of hybrid crop seeds.
It was reported that an Origin executive, speaking at an industry conference in Asia, reported that corn price are up 40% year-on-year in China, and characterizing the present macro outlook as âfavorable.â We surmise that itâs this level of buzz that pushed Origin shares up some 1.7% over the noon hour past the $10.00 mark, as options traded at nearly 20 times the normal level and implied volatility skyrocketed 17.0% to 135.12%. A look at volume distribution shows more than 5 times as many calls moving as puts, but much of this appears tied up in call shorting at the January 12.50 strike in a contrarian play against the companyâs current share price momentum.
Ok so smart money sees this going to $12.50 and maybe stopping there, that's how I read that. Actually my chart work shows $15... and from $10.00 that aint half bad. Let's get the bad news about this company out first.
While Chinese stocks were shooting up 100% last year, Origin Agritech's (SEED) shares fell 14.5% to $10.94, to a $250 million value. Possible reasons? 1) General fallout from the Amaranth hedge fund collapse. Amaranth owned Special Purpose Acquisition Companies (SPAC's) similar to Origin, putting all SPAC's in disfavor. 2) Company blunders like filing its December 2005 annual report four months late, changing revenue recognition rules, shifting to a September fiscal year, firing its auditor and holding the annual shareholder's meeting in Beijing, when the stock only trades in the U.S. 3) A look at the checkered ethical and legal past of Richard Propper, who headed Chardan China Acquisition when it acquired the seed company and changed its name to Origin: Charges of insider information while at Montgomery Medical Ventures, an SEC settlement over failure to disclose holdings and transactions in public companies and a recent suit against Propper and his partners for defrauding the Small Business Administration of $32 million. Origin enthusiasts include its CFO Jeff Wang, who says revenue by June 30 was $65 million, sharply higher than five years ago, sales are growing and acquisitions are a focus. The Maxim Group, backer's of Origin's IPO, says shares are worth $21, and Propper says earnings will be up significantly in '07 as well. Bottom Line: Its fans say Origin could be worth $21, but legal woes could drag the stock down further.
Now the good news like Syngenta or Monsanto or Agco these guys are into hybrid corn seeds and with the corn situation as it is now this should be a prosperous year for them... I hate buyinmg before earnings but the gambler in me always does this, I'll post some comments from Agco's conference call which was specific to them but casts a good light on the Chinese hybrid. ~ stoney
It was reported that an Origin executive, speaking at an industry conference in Asia, reported that corn price are up 40% year-on-year in China, and characterizing the present macro outlook as âfavorable.â We surmise that itâs this level of buzz that pushed Origin shares up some 1.7% over the noon hour past the $10.00 mark, as options traded at nearly 20 times the normal level and implied volatility skyrocketed 17.0% to 135.12%. A look at volume distribution shows more than 5 times as many calls moving as puts, but much of this appears tied up in call shorting at the January 12.50 strike in a contrarian play against the companyâs current share price momentum.
Ok so smart money sees this going to $12.50 and maybe stopping there, that's how I read that. Actually my chart work shows $15... and from $10.00 that aint half bad. Let's get the bad news about this company out first.
While Chinese stocks were shooting up 100% last year, Origin Agritech's (SEED) shares fell 14.5% to $10.94, to a $250 million value. Possible reasons? 1) General fallout from the Amaranth hedge fund collapse. Amaranth owned Special Purpose Acquisition Companies (SPAC's) similar to Origin, putting all SPAC's in disfavor. 2) Company blunders like filing its December 2005 annual report four months late, changing revenue recognition rules, shifting to a September fiscal year, firing its auditor and holding the annual shareholder's meeting in Beijing, when the stock only trades in the U.S. 3) A look at the checkered ethical and legal past of Richard Propper, who headed Chardan China Acquisition when it acquired the seed company and changed its name to Origin: Charges of insider information while at Montgomery Medical Ventures, an SEC settlement over failure to disclose holdings and transactions in public companies and a recent suit against Propper and his partners for defrauding the Small Business Administration of $32 million. Origin enthusiasts include its CFO Jeff Wang, who says revenue by June 30 was $65 million, sharply higher than five years ago, sales are growing and acquisitions are a focus. The Maxim Group, backer's of Origin's IPO, says shares are worth $21, and Propper says earnings will be up significantly in '07 as well. Bottom Line: Its fans say Origin could be worth $21, but legal woes could drag the stock down further.
Now the good news like Syngenta or Monsanto or Agco these guys are into hybrid corn seeds and with the corn situation as it is now this should be a prosperous year for them... I hate buyinmg before earnings but the gambler in me always does this, I'll post some comments from Agco's conference call which was specific to them but casts a good light on the Chinese hybrid. ~ stoney
