Puda Coal (PUDA) Crushed on Fraud Allegations

Shares of Puda Coal, Inc (NYSE: PUDA) are getting crushed today, down well over 25 percent on news of fraud allegations.

Contrarian Alfred Little said this, "Considering the 2009 and 2010 audited financials can no longer be relied upon, and more importantly the complete lack of internal control that allowed Chairman Zhao to first steal the company, then sell half the company (pocketing the proceeds) and then pledge the other half of the company to a Chinese PE fund while piling on $530.3 million of 14.5% debt, I strongly believe $2.66 is the most this stock is worth today."

In 2010 Zhao sold 49% and pledged the other 51% of Shanxi Coal to CITIC Trust Co., a Chinese private equity fund, for $37.1. Zhao then leveraged Shanxi Coal by borrowing $530.3 from CITIC at an incredibly high 14.5% annual interest rate (including fees) to finance the development of its coal mines.

Puda was trading at $6.73, plunging $2.37, or 26.04 percent, as of 11:45 AM EDT.