Towards the end of yesterday’s trading session, Jade Art’s stock suddenly tanked, losing 20.93% of its value on over 1.1 million shares traded. The market closed trading at $0.34 for a share, whereby during the day the price approached the yearly bottom of $0.17 and broke all of the support levels from the last months.
That extremely negative performance coincided with the filing of the company’s financial results for the quarter ended this June and on no other news whatsoever from the company over the last months, it seems that investors have built other expectations about Jade Art’s business.
The financials appeared positive from a quantitative point of view. Year-over-year, revenues increased substantially and the net income was nearly 200% higher. Though, it seems that the execution of the company’s business plan so far has caused disappointment among investors.
Jade Art entered the business with raw jade in January 2008 through forming a wholly-owned Chinese subsidiary to engage in the sale and distribution of raw jade throughout China. The goal from that time was to vertically integrate the activities with jade processing, carving, polishing, and, at a later date, retail sales. Shortly after that, Jade Art signed an Exclusive Distribution Rights Agreement with Wulateqianqi XiKai Mining Co., Ltd., according to which Jade received the right to purchase raw jade from that mine at a fixed price for five years, subject to adjustment every five years thereafter.
The XiKai mine is up to date the only supplier of raw jade and the sale of raw jade remains the only source of revenues for the company. Further, the agreement has been capitalized and still constitutes over 75% of Jade’s assets. In addition, Jade still has a limited number of customers.
Expansion plans also seems to be canceled by now, as an investment agreements from last November failed. Then, the company paid an acquisition deposit to an investment firm, which was supposed to assist Jade in finding an appropriate acquisition target. The $8.8 million deposit was returned to Jade Art at the beginning of the month.
