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Greenberg: China's Rino Runs Into Trouble And A Selloff

Wednesday, 17 Nov 2010 | 3:53 PM ET

I’ve been warning you about the danger of Chinese reverse mergers and IPOs for months.

Yet another reason to beware: Rino International, an environmental protection company that tumbled 15 percent Wednesday before trading was halted. That’s after losing around two-thirds of its value over the past few weeks.

This latest pummeling is after the company late Tuesday delayed its earnings conference call scheduled for Wednesday with little explanation—other than saying the move was made “after consultation with the chairman of the company’s audit committee.”

That followed a negative report from the research firm Muddy Waters, a negative mention over the weekend in "Barron’s" and then, today, a downgrade to the dreaded sell by the firm, Canaccord Genuity.

Reason for the sell: Muddy Waters had said it found that six of nine customers claimed by Rino weren’t customers; Canaccord analyst Michael Deng said he found at least one that “contradicts management’s explanation.” In other words, Deng told me today, one that is not a customer. Deng also cited accounting issues.

Rino, which hit the No. 1 spot on the IBD 100 a little over a year ago, is just the latest in the list of Chinese companies that trade in the U.S., mostly reverse mergers, that have imploded this year under a cloud of controversy.

My take: Isn’t the first, won’t be the last.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

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