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Infant formula company Jatenergy Ltd rockets higher on a wild day of trade

It certainly has been an eventful day for the Jatenergy Ltd (ASX: JAT) share price.

The infant formula hopeful’s shares went from being one of the worst performers on the market to one of the best performers in a matter of an hour this afternoon after returning to trade.

At the time of writing Jatenergy’s shares are up almost 11% to 26 cents, having been down as much as 17% to 19.5 cents after lunch.

What happened?

There appears to have been a little confusion with the company’s release today that led to a spot of panic selling.

According to the release, when Jatenergy acquired its 51% stake in the Golden Koala infant formula brand it erroneously stated that it had CFDA (Chinese Food and Drug Administration) approval to sell infant formula in China.

What it was meant to say was that it had CNCA (Certification and Accreditation Administration of the People’s Republic of China) approval only.

Management has sought to clarify this because the CFDA was abolished last week at the end of the 13th National People’s Congress of the People’s Republic of China and replaced with a body known thus far as the State Market Regulatory Administration.

What does this all mean?

Essentially nothing has changed. The Golden Koala brand can continue to be sold in the China market if it was manufactured prior to January 1 2018.

Product manufactured after that date cannot be sold until the receipt of approval from the relevant body, as was previously advised. Management expects to lodge its application in April or May and will update the market accordingly.

Should you invest?

Like Bubs Australia Ltd (ASX: BUB) and Wattle Health Australia Ltd (ASX: WHA), Jatenergy’s Golden Koala aspires to be the next Bellamy’s Australia Ltd (ASX: BAL) or A2 Milk Company Ltd (ASX: A2M).

While one of these fledgling companies could potentially achieve this, I would suggest that investors wait to see sales growth that demonstrates this potential. After all, let’s not forget that Blackmores Limited (ASX: BKL) failed with its infant formula punt despite its size and strong brand image.

Because of this, I would sooner buy a2 Milk or one of these top mid cap stocks.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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