Tuesday, January 05, 2016 7:58:15 PM
You mean VIE (Variable Interest Entity). Yes, ABAT has a VIE, namely ZQPT, so not Wuxi (scooters) or the new plant.
Alibaba apparently also has a VIE but from what I read, it's only a very small part of the business. So shouldn't be much of a concern.
VIE's are normal structures, even in the US. The problem starts in China, because it must have a legal representative (=owner) according to Chinese law. The SEC circumvented it by 4 or 5 legal agreements that transfer the economic benefits of the VIE to the shareholders (in the US). The problem starts when the legal owner (= Chinese) refuses to pay. Basically the SEC is to blame for this.
That's exactly what happened recently with NUIN. The CEO (legal owner of the VIE) refused to transfer any money to the parent company, almost bankrupting the company. And yet it has something like $140M in cash "stuck" in the VIE, with the market cap being something like $7M now. Apparently the BOD (specifically, Fearon the 10%+ owner) and the CEO got into a fight. My guess is, they didn't agree on a dividend, and the fight escalated.
This case is actually so interesting, that I wrote Paul Gillis about it, the man, and he told me that he will write an article on this. He is just waiting for the next material development now. It's the BOD against the CEO. They have already announced, they will replace the CEO as Chairman, but they are not firing her yet. They intend to get a loan from the VIE of no less than 50% of the available cash (which should amount to some $70M+) and then they will probably pay it out to the shareholders. They think they can pull it off. Paul Gillis is not so sure. There is more, as the BOD has really increased the pressure on the CEO. In the mean time, they may have to do a rights offering because the company has no cash... LOL.
I am a shareholder here and expect to be paid well, with a little bit of luck. Then apparently they are going to milk this company further, because it is a cash cow. But a bit of a problematic one now. If this ever gets to court (it will go to a court in China!) it will be very embarrassing not only for the CEO, but for the Chinese government, and the SEC!
And that's where Paul Gillis comes in, because the SEC reads his blog.
Alibaba apparently also has a VIE but from what I read, it's only a very small part of the business. So shouldn't be much of a concern.
VIE's are normal structures, even in the US. The problem starts in China, because it must have a legal representative (=owner) according to Chinese law. The SEC circumvented it by 4 or 5 legal agreements that transfer the economic benefits of the VIE to the shareholders (in the US). The problem starts when the legal owner (= Chinese) refuses to pay. Basically the SEC is to blame for this.
That's exactly what happened recently with NUIN. The CEO (legal owner of the VIE) refused to transfer any money to the parent company, almost bankrupting the company. And yet it has something like $140M in cash "stuck" in the VIE, with the market cap being something like $7M now. Apparently the BOD (specifically, Fearon the 10%+ owner) and the CEO got into a fight. My guess is, they didn't agree on a dividend, and the fight escalated.
This case is actually so interesting, that I wrote Paul Gillis about it, the man, and he told me that he will write an article on this. He is just waiting for the next material development now. It's the BOD against the CEO. They have already announced, they will replace the CEO as Chairman, but they are not firing her yet. They intend to get a loan from the VIE of no less than 50% of the available cash (which should amount to some $70M+) and then they will probably pay it out to the shareholders. They think they can pull it off. Paul Gillis is not so sure. There is more, as the BOD has really increased the pressure on the CEO. In the mean time, they may have to do a rights offering because the company has no cash... LOL.
I am a shareholder here and expect to be paid well, with a little bit of luck. Then apparently they are going to milk this company further, because it is a cash cow. But a bit of a problematic one now. If this ever gets to court (it will go to a court in China!) it will be very embarrassing not only for the CEO, but for the Chinese government, and the SEC!
And that's where Paul Gillis comes in, because the SEC reads his blog.
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