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No. of Recommendations: 4
From August 2011

Morgan Stanley is rumored to have spent $1 million in due diligence before buying Yongye.

Morgan then spent $50 million to buy 5.7 million preferred convertibles. The convertibles pay 7% yearly paid in shares. The duration is 5 years. This does not look like adequate compensation for $1 million in due diligence unless Yongye is capable of convincing the market it is all it says it is and the price triples or quadruples. It has to nearly double to get them to the $8.80 they paid for the preferreds. The conversion rate is flexible and it will be impossible to know the conversion price or number of shares until it happens. All formulas for calculating the dividend distribution and the number of common shares conversion will yield are subject to variable outcomes of price per share and income targets. Suffice it to say, they will lose money if YONG continues to trade far below $8.80 at the 50 DMA of $4.64

But wait. Could they be planning something else?

For all those with a basis below $6.60--congrats

If I had been smarter i would have bought at $2.71 and more than doubled my money

If Morgan had been smarter they would have offered this premium in May 2012 and saved a couple of bucks. They do some stupid things

If you missed it this time around, I predict they will leverage it up, take it private, clean it up for a few years and then IPO it at 75 million shares and make a couple hundred million dollars instead of the 7% per year paid in nearly worthless shares. You could buy some more at the IPO
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