Telestone Technologies (NASDAQ:TSTC)

Two recent pieces of information had led many investors to believe that TSTC's need to raise funds via an equity raise was minimal.

1. Recent approval of line of credit:

Telestone Technologies Corporation announced today that it has secured a 300 million RMB ($44 million USD) line of credit from Bank of Beijing.

The new bank line for approximately $44 million was entered into on September 27, 2010, which has a five-year term. Telestone is under no obligation to utilize any part or all of the credit line.

"We are pleased Bank of Beijing is providing the Company with a sizable line of credit," stated CEO and Chairman Mr. Daqing Han. "Obtaining funding from an established lender further validates Telestone's strong operating model and attractive growth outlook. We believe this credit line will provide invaluable support for our continuing business expansion and meet our working capital needs over the next several years. With additional financial flexibility from this line and a backlog of $106 million, we remain confident we will achieve our $129.4 million revenue target for the full year 2010."

2. Statement from 2010 third quarter 10Q clearly indicates that an equity raise was not on the table:

We believe that the combination of present capital resources and unused financing sources are more than adequate to meet cash requirements for 2010 and the following years. We intend to meet our liquidity requirements, including capital expenditures related to market expansion, research and development for new products and technology, through cash flow provided by operations and additional funds raised by short-term loan. We are an enterprise with good credit and our relationships with these banks are in good standing. We believe that adequate cash flow will be available to fund our operations and additional needs in the future

Today's news tells a different story; Some may claim a Stone Called Misrepresentation

On November 24, 2010, Telestone Technologies Corporation entered into an underwriting agreement with Roth Capital Partners, LLC and JMP Securities LLC (together, the “Underwriters”), related to a public offering of 1,675,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a price of $12.00 per share less a 6% underwriting commission. Under the terms of the Underwriting Agreement, the Company has granted the Underwriter an option, exercisable for 30 days, to purchase up to an additional 251,250 shares of Common Stock to cover over-allotments, if any.

This financing will result in about 18% dilution, bringing 2011 estimates down to $1.95 from $2.38. Per most recent analyst estimates, quarterly EPS may exhibit lumpier 20% to 30% growth after factoring in dilution:

Prior to offering

GeoTeam Post offering Adjustments

Note that TSTC blew away 2010 third quarter estimates.  We are not sure if this was a pure beat or just a "make up" from the soft 2010 second quarter results. We will await analyst updates in order to gain further clarity.

Investors may view the following news as positive, as it could minimize the need for an equity offering.  It also adds legitimacy to the company.

Telestone Technologies Corporation announced today that it has secured a 300 million RMB ($44 million USD) line of credit from Bank of Beijing.

The new bank line for approximately $44 million was entered into on September 27, 2010, which has a five-year term. Telestone is under no obligation to utilize any part or all of the credit line.

"We are pleased Bank of Beijing is providing the Company with a sizable line of credit," stated CEO and Chairman Mr. Daqing Han. "Obtaining funding from an established lender further validates Telestone's strong operating model and attractive growth outlook. We believe this credit line will provide invaluable support for our continuing business expansion and meet our working capital needs over the next several years. With additional financial flexibility from this line and a backlog of $106 million, we remain confident we will achieve our $129.4 million revenue target for the full year 2010."