Sino Gas International Holdings, Inc. (OTCMKTS:SGAS) Might be in Trouble

0SGAS.pngAs you can see from the chart on the right, Sino Gas International Holdings, Inc. (OTCMKTS:SGAS) has never really been the most actively traded stock on the OTC Markets. We’ve seen a few volume spikes over the last couple of months, but on the whole, trading has been pretty uneventful.

Which is something of a shame because SGAS looks like a relatively solid investment. The company delivers natural gas for home and industrial purposes through its subsidiaries which are located in China and the financial statements show that the business is doing rather well.

The latest 10-Q covers the third quarter of 2013 and it presents the following figures:

  • cash: $4.5 million
  • current assets: $34.6 million
  • current liabilities: $60.6 million
  • quarterly revenues: $13.8 million
  • quarterly net income: $2 million

Indeed, the working capital deficit is quite substantial and the bottom line, though positive, is not spectacular. There are, however, some good things like the year-over-year increase in both revenues and net income. On the whole, if the volumes start to pick up, SGAS might prove to be a relatively solid place for your money.

Unfortunately, the company announced on Wednesday that very soon, you won’t be able to invest in SGAS. Apparently, they have entered into a merger agreement according to which all the issued and outstanding shares are about to be bought by Yuchuan Liu (SGAS‘ current CEO) and his partners at $1.30 per share. If everything goes according to plan, SGAS will soon be a privately-held company and its stock won’t be listed on the OTC Markets.

The thing is, it would appear that not everything is going according to plan. Less than twenty-four hours after the announcement of the “going private” transaction (which is expected to close in the second quarter of 2014), a law firm called Tripp Levy PLLC issued a press release of their own informing us that they are investigating the deal. According to the lawyers, SGAS‘ book value amounts to approximately $1.64 per share which, a quick calculation reveals, is around 26% above the $1.30 proposed price.

Tripp Levy wasn’t the only law firm to start an investigation against SGAS‘ Board of Directors. No less than seven other entities announced that they are looking into the matter as well and invited all shareholders to contact them in case they have any questions.

Predicting the results of the investigations is pretty much impossible at the moment, but the fact that there are so many lawyers involved suggests that either there’s something wrong with the deal, or there are quite a lot of people complaining about it.

In any case, a potential trade should be well thought through.

6REDG.pngUnlike SGAS, Smart Ventures Inc (OTCMKTS:SMVR) managed to register quite an interesting session on Friday. Unfortunately for the shareholders, the ticker didn’t do too well. In just six and a half hours, it managed to lose nearly a third of its value while registering a dollar volume of around $1.2 million. Red Giant Entertainment Inc (OTCMKTS:REDG)’s performance was even worse. It wiped out more than 40% of its market cap and finished the week at $0.006 per share.

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