Professional Diversity Network Inc IPDN shares fell 10 percent after Cliffside Research released a new bearish research note. Cliffside’s Strong Sell rating on Professional Diversity is mostly related to the majority stake that Cosmic Forward Limited (CFL) took in the company back in August 2016.
After doing some digging, Cliffside found that CFL shareholders are executives of Chinese company GNet Group.
According to Cliffside, GNet has been accused my Chinese newspaper Southern Weekly of scamming unsophisticated investors.
“GNet investors have taken to the streets to protest the company and have formed Internet forums to expose what some claim is a Ponzi scheme,” Cliffside says.
Cliffside suggests that in 2015, GNet used a British shell company called Gate Ventures to trick Chinese investors into believing GNet had gone public in London. Within four months, the shell company was de-listed.
Where there’s smoke, there is often fire, and Cliffside sees major downside to Professional Diversity if allegations against GNet are true.
“The $20 mil paid to IPDN could result in lawsuits from GNet investors who lost money, and IPDN’s current Chinese management team could face legal consequences including arrest,” Cliffside concludes.
Cliffside has set a $3.00 price target on Professional Diversity Network shares and believes even at the $3 level, risk is skewed to the downside.
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