Rino Intl (RINO) began to really fall off a cliff late in the day yesterday and gapped down this morning to a new 52 week low on heavy volume.  The sell off comes as a result of a scathing 30 page research report from a small firm called Muddy Waters Research.  Usually, research from small firms go relatively unnoticed, but in this case the firm calls Rino Intl (RINO) a scam, spooking investors and sending the stock reeling.  It issued a Strong Sell and a price target of just $2.45.

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So what has Muddy Waters found to indicate the company is a scam?  The firm found many customer relationships don’t exist and sales are much lower than it claims here in the US.  They indicate that Chinese regulatory filings show revenues 94% lower than what they reported in the US indicating management is cooking the books.  It doesn’t stop there.  They also claim management is funneling funds to themselves for personal use such as purchasing a $3.2 million home in California the day the company closed on a $100 million round of financing.  To finish up the scathing piece, the firm says RINO isn’t an industry leader, but rather an obscure company in a crowded field.  Ouch.

Rino responded to the report this morning saying it intends to do a full internal review of the allegations and looks forward to providing investors with a detailed response.  Let’s keep in mind that Muddy Waters isn’t exactly reputable with a long history and likely has a big short position, but that doesn’t mean this is a buying opportunity down here.  It can take a long time for the smoke to clear on allegations like this.  It should be a mighty interesting conference call when the company reports earnings after the bell on November 15th.