Puzzle over Chinese stock soaring by 4,500 pct

INVESTORS who put money into US index funds usually aren’t looking for surprises. Those who bought into the Russell 2000 recently got one anyway: A littleknown Chinese stock that went crazy for no apparent reason.

Shares of Wins Finance Holdings Inc., a company that guarantees loans for small businesses in China and leases equipment to them, have soared as much as 4,555 per cent since debuting on Nasdaq in 2015. The firm’s market value surpassed US$ 9 billion ( RM41 billion) in February, about four times as much as LendingClub Corp., an online lender with 50 times the revenue.

Even Wins said in a release that it had no idea what drove the surge in its stock, which boasts the best performance in the Nasdaq Composite Index over the past 12 months.

So how did a tiny Chinese company make it into the portfolios of US retirees? And

We spent hundreds of hours researching the company, and the story has become one of the most abstract in my career. William McNarland of Eiffel Peak Capital, a merchant bank in Calgary

how did its biggest shareholder, Wang Hong, become a billionaire, at least on paper?

The mystery begins on the 37th floor of a shiny Times Square skyscraper. That’s where Wins’s US headquarters are located, according to Securities and Exchange Commission filings. But there aren’t any signs of the business. Instead, the floor is occupied by Forefront Capital Advisors, a financial- services firm founded by Bradley Reifler, who used to be on the board of Wins.

Reifler, whose bronzed complexion matches his golden cuff links, is known on Wall Street for co-founding Pali Capital Inc., a brokerage that at its height was profitable enough, he said, to blow US$ 4 million on a poker party with singer John Legend. Pali went down in flames in 2010 amid a dispute between the two founders, and the firm’s parent company filed for bankruptcy.

Reifler, who filed for personal bankruptcy in January, lives on a 145- acre horse farm in upstate New York. He resigned from the Wins board last year when the company was considering making loans in the US, because he wanted to avoid a conflict with Forefront’s lending business, he said in an interview in February.

About three Wins employees still work in his New York office, he said, but he wouldn’t reveal their names. Reifler also said he doesn’t know who runs the company now, although he mentioned a recent lunch he had with Jianming “Jimmy” Hao, who’s listed in filings as the firm’s chairman and co- chief executive officer.

“I’m very loyal,” said Reifler, who also lets Richard Xu, a former Wins president, work in the office. “If I found something that was wrong, I would have a different feeling.”

The search for answers didn’t go any better at the company’s Beijing headquarters in a three- storey building in a quiet compound in the city’s Chaoyang district.

A receptionist said that only a few Wins employees worked there and referred inquiries to a woman in human resources who was traveling.

That woman, contacted before the visit, had recommended calling the US.

Calls to the company’s New York phone number were answered by a man named Neil Gong, who said several times that he needed to ask executives in China about scheduling an interview. No interview was offered.

Giovanni Caruso, a lawyer for Wins in New York, declined to comment. — WP-Bloomberg