DEER Down More Than 17%; What Gives?

It's not a good day for Deer Consumer Products, Inc. (NASDAQ: DEER). What started out as a normal trading day has turned into a chaotic downturn of epic proportions – at last count, Deer was down more than 17%.

The reason might be due to some confusion over the purchase of land use rights.

In the article, writer Alfred Little spoke about his conversations with the Wuhu Municipal Bureau of Land & Resources, “the only government authority allowed to issue [a certificate for land use rights].” Little made the following points:

1. “Incredibly, none of the Municipal Bureau officials could verify the existence of DEER's land use rights certificate,” Little wrote. “But neither would they prove it was a fake. Officials interviewed were either vague or uncertain in their responses or downright protective of DEER's interests in this transaction.”

2. “The Record Office under the Wuhu Municipal Bureau of Land & Resources Enforcement and Inspection Department keeps a record of all land certificate and land transaction activities,” Little wrote. “Its attempt to verify the certificate # 019711318 S in the computerized database yielded no record. The staff at the Record Office clearly explained that any registered and issued land certificate has to be able to be located in their system, although they are hesitant to conclude this particular certificate is a forgery.”

After further questioning, Little was pointed to the Land & Resources Land Registry Management Department.

3. “The staff at the Land Registry Management Department attempted to look up this certificate based on the number and likewise found no record of it,” Little wrote. “The staff stated the same story as the Record Office earlier, that any stamped and issued certificate must have a record saved in their system. The staff specifically stated that anything that was not in their system does not exist. They were, however, unwilling to speculate on how the official seal of the Municipal Bureau ended up on DEER's certificate.”

4. “Not satisfied with our findings, I revisited Mr. Xu, the bureau official I mentioned in my previous report,” Little wrote. “Mr. Xu first thought the certificate was a legitimate copy after seeing it. However, once he was updated with our findings in the Record Office and Land Registry Management Department, he quickly pointed out a record of any genuine land use rights certificate must be found at the two departments I visited.”

As a result of this, Little believes that Deer's certificate is “very suspicious.”

With the company's shares continuing to decline, it would seem that he's not the only one with that belief.