{ "docId": "019dd923-622c-750b-8b95-b524c5d9c7a3", "docSlug": "4be0499ce775", "documentTitle": "Orient Paper Inc. (ONP)", "authorId": "51_Muddy_Waters", "authorName": "Carson Block and Sean Regan", "documentKindSlug": "shareholder-letter", "documentKindLabel": "Shareholder letter", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2010-07-02 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 8, "pageCount": 10, "prevPage": 7, "nextPage": 9, "slideType": "other", "function": "illustrate_case", "density": "overcrowded", "nDataPoints": 0, "notes": "This is a narrative text slide, likely part of a short-seller's report or case study.", "elementsJson": [ "paragraph" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b95-b524c5d9c7a3/8", "deckHref": "/decks/019dd923-622c-750b-8b95-b524c5d9c7a3", "deckJsonHref": "/decks/019dd923-622c-750b-8b95-b524c5d9c7a3.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b95-b524c5d9c7a3#slide-8", "components": [ { "bbox": null, "kind": "callout", "text": "After we passed the workers at the folding tables, we stopped at the cutting machine for the line. Sean leaned over and said \"We got 'em.\"", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0395-748f-9561-d50d9aee0a7d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.13, "w": 0.7, "x": 0.15, "y": 0.76 }, "kind": "paragraph", "text": "After being taken to the factory (with Rick as a surprise fellow passenger), we had a few minutes of small talk with Chairman Liu in his office. Then we walked into the first workshop. The workshop walls were old and worn. But what really got me was the steam everywhere. Chairman Liu was moving quickly, and I was trying to keep up. I was a little disoriented because this was not what I had expected. After we passed the workers at the folding tables, we stopped at the cutting machine for the line. Sean leaned over and said “We got ‘em.” That was much faster than he'd expected.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4d892c0f-191e-477e-9c2f-4365b647d7b4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.7, "x": 0.15, "y": 0.27 }, "kind": "paragraph", "text": "When we got to Beijing one day late, our mentality had changed from long side due diligence to looking for evidence to build our short case. I had updated my father that there's no way this would be a WAB deal. He was fairly disappointed and played devil's advocate to a lot of the points I made about its inherent problems. In the end, he resigned himself to accepting that the company was not a buy.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5121b1ea-1535-4cac-97ae-a693bea5c21c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.7, "x": 0.15, "y": 0.11 }, "kind": "paragraph", "text": "On January 3rd, Sean and I were at Hong Qiao Airport in Shanghai for a number of hours due to the snow in Beijing. This was the first opportunity either of us had to look through the 10-K and recent 10-Qs. As we went through the documents, my jaw dropped a number of times. There were so many red flags, a number of which we covered in our report. By the time we finished our reading, we were convinced the stock was a short.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "59920abe-38d8-4d90-9f9d-435f0c94ab21", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.7, "x": 0.15, "y": 0.4 }, "kind": "paragraph", "text": "The morning we left for Baoding, Sean and I had a spat in the hotel café. I was pouring over my questions, notes, and the filings. I kept trying to discuss the question pattern with Sean, but he wasn't engaging. He was conversing with our interpreter. In an aside, I told him that he needed to get more serious. We exchanged expletives. We then left for the train station.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9a409eaf-da16-4678-9302-db08aa49d61f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.7, "x": 0.15, "y": 0.9 }, "kind": "paragraph", "text": "The only further communication between ONP and my father or me was on January 6, 2010 when Chairman Liu's assistant emailed me to ask whether I had any follow up questions. I said that we'd like to visit the factory again, but would wait until after the fundraise. (Because of our subsequent document research, that turned out to be unnecessary.) There was no further communication with ONP until this week.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e71c6563-bb48-4ac2-868b-1f4c3fd969f6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.7, "x": 0.15, "y": 0.53 }, "kind": "paragraph", "text": "On the train, Sean explained that it was unlikely one visit to the factory would be enough to build the case. He told me “I've visited over 1,000 factories and run three others. Running a factory is all about control. Guys who run factories are great at controlling people and conditions because they have to be. When you go to a factory, you're on his turf. You won't see what he doesn't want you to see the first time. That's why anytime I qualify a factory, I make at least three visits. They can cover things up, but you look for whether they're covering things up the same way each time. When you notice the differences, you understand what's going on.” I calmed down, accepting that we were likely to have to make at least one more trip out to ONP.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fbcf0192-5517-4a36-87dd-f21c6704a7f9", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"I've visited over 1,000 factories and run three others. Running a factory is all about control. Guys who run factories are great at controlling people and conditions because they have to be.\" — Sean", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-0395-748f-9561-dbfd8a71143f", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 8, "from": 6, "beatId": "80318c7b-9708-4b3a-b2b5-5b35fe211ff6", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Evidence & Proof", "beatSlug": "consultants-gambit-evidence-proof", "evidence": "The document provides evidence and context to support its claims.", "position": 2, "confidence": 0.8, "parentBeatName": "Evidence", "parentBeatSlug": "evidence" } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }