JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Investment Advisors

IPO Coverage - PPDAI Group Inc (NYSE: PPDF) - Achilles' Heel of P2P Lending

Qudian (NYSE: QD) IPO: Payday Loan Company Shadowed by Ant Financial

Qudian IPO Early Thought: An Alipay Partner's Dilemma?

Investment Advisors, JL Warren Capital

Junheng Li

Equity Bottom-Up

<p>We believe that <a href="https://www.smartkarma.com/entities/26739" target="_blank" data-smartkarma-citation="entities:26739:1">Remark Holdings Inc (MARK US)</a>  is a pump and dump scheme.  MARK rallied from $3.59 to $11.98 in just under 2.5 months, mostly driven by press releases highlighting a series of contracts allegedly signed in China for the sale of AI and big data products. MARK’s AI subsidiary in China is called KanKan.  KanKan is claimed to have two facial recognition products and a credit rating algorithm.  Facial recognition software in China is not novel but largely considered to be commodity products.  Kankan markets and sells their software with two main approaches simultaneously: customization and   heavy discounting.  As of this writing wedo not think that Kankan has a viable credit rating product.  I recently met with CFO of MARK.  and during our conversation, I found him to evasive about its data sources.  At the same time our extensive industry channel checks, could not verify that KanKan has paying Fintech customer, as its CFO and press releases claimed.  Based on our due diligence, we believe that the management has most likely overstated their 2018 contracts to “pump up” the stock to motivate shareholders to exercise the ~23 mm warrants and options resulting a cash conversion into the company. </p><p>At the current $11.92 share price, there will be massive dilution to existing shareholders based on the potential exercise and or conversion of 8 mm employee options and 15mm warrants.  If all of the options and warrants exercise or convert respectively, this would represent a massive dilutive event for the is existing equity holders, regardless whether the company is profitable or not.  In this note, we focus on the business prospects of KanKan, Remark’s new AI business founded in 2016 in China based upon our on-the-ground due diligence on KanKan. </p>

We believe that Remark Holdings Inc (MARK US)  is a pump and dump scheme.  MARK rallied from $3.59 to $11.98 in just under 2.5 months, mostly driven by press releases highlighting a series of contracts allegedly signed in China for the sale of AI and big data products. MARK’s AI subsidiary in China is called KanKan.  KanKan is claimed to have two facial recognition products and a credit rating algorithm.  Facial recognition software in China is not novel but largely considered to be commodity products.  Kankan markets and sells their software with two main approaches simultaneously: customization and   heavy discounting.  As of this writing wedo not think that Kankan has a viable credit rating product.  I recently met with CFO of MARK.  and during our conversation, I found him to evasive about its data sources.  At the same time our extensive industry channel checks, could not verify that KanKan has paying Fintech customer, as its CFO and press releases claimed.  Based on our due diligence, we believe that the management has most likely overstated their 2018 contracts to “pump up” the stock to motivate shareholders to exercise the ~23 mm warrants and options resulting a cash conversion into the company. At the current $11.92 share price, there will be massive dilution to existing shareholders based on the potential exercise and or conversion of 8 mm employee options and 15mm warrants.  If all of the options and warrants exercise or convert respectively, this would represent a massive dilutive event for the is existing equity holders, regardless whether the company is profitable or not.  In this note, we focus on the business prospects of KanKan, Remark’s new AI business founded in 2016 in China based upon our on-the-ground due diligence on KanKan. 

Remark Holdings: Phantom AI Business Drives Rally; 60% Downside