Moatable Inc ADR (MTBLY)

[Chrysanthemis]

Thanks! Given today's movement, I think that the market suddenly considers an approved settlement a lot more likely.

Now, the signature WolfCapital (who seems very knowledgeable to me) on Seeking Alpha said already in a comment in end-December that the appeal would probably be heard by the First Department in spring, probably April, followed by a ruling probably in June.

Maybe today's movement has something to do with this?

[downthehatch]

Nothing filed in the NY Supreme Court docket since April 7, but these filings are often not reflected until a day or two after filing.

Will keep checking the docket.

Something is clearly happening. Almost 400,000 shares traded today, and up over 15%

[downthehatch]

Must be some settlement negotiations going on and word leaking out.
I see no news to account for the surge in the price/volume today.

But a settlement would mean that payment of around 25/share is closer than after a full trial that will take this case well into 2023

[downthehatch]

Wow-- thanks for posting. That is quite significant, and indicates that the judge does recognize that his ruling cannot stand on appeal.

Now the question is whether the Plaintiffs - and their lawyers- will accept that compromise, take a little less in fees and per share dividend, to save what is likely to be months of continued litigation to have the judgment overturned.

My guess?
It's not a bad deal, and as the saying goes, "a bird in hand is worth two in the bush"

$50-60 million for the lawyers is still a pretty good haul!

We'll see! Not much point in selling today, thats for sure.

[Chrysanthemis]

The article explains that the judge Borrok, at a status conference today, said that he would approve a settlement which would give some 40-50 MUSD less to the plaintiffs' lawyers and allocate that amount to the former shareholders instead.

"The judge confirmed that the remainder would go to current shareholders - about $199 million – net of our fees."

The article concludes that the reasonably likely downside for current RENN shareholders would now be a $25.80 distribution before the end of this year which is the per share value of the $199 million net settlement, and ends by stating that the share has several dollars of remaining value.

Possibly the judge understood in the meantime that his previous decision had no basis in law, and now tries to save face.

[Enterprising Investor]

I hope this helps.

TL; DR

1. Buy RENN anywhere under $25 per share.
2. Wait.
3. Get a dividend of over $25 this year.

[downthehatch]

That explains the uptick!
Unfortunately, I'm out of free views of Seeking Alpha. May have to spring for a subscription out of my RENN earnings....lol

[Enterprising Investor]

An Update On Our Best Idea For 2022 (1/19/22)

https://seekingalpha.com/article/4480405-stws-best-idea-for-2022-renren?source=copyToPasteboard

[downthehatch]

WOW!
Anybody else buy some of those 17.80- 18.5 shares?

They are looking good today!!

Back up to $20.00

[downthehatch]

Another buying opportunity in RENN today, as some are selling based on the filing of an motion to intervene by some former shareholders. And a filing by defendants to stay the proceedings during the appeal, or alternatively to dismiss the case brought by the current Plaintiffs. (which is a nice Hail MKary, but highly unlikely to be granted)

Certainly, based on Judge Borroks ruling, it would be surprising NOT to see some new parties intervene and try to get a slice of the $300 million.

But nothing has changed, fundamentally.

The case is still a derivative action, and that means there is absolutely no case law support for Borrok's decision. I still am confident the decision will be reversed, and I bought some more on the drop today.

[Chrysanthemis]

Thank you very much for sharing!! Very interesting!!

[downthehatch]

Great article about RENN today.
This reflects my thinking 100%.

RENN is still a BUY at this stage:

https://seekingalpha.com/article/4478529-renren-is-so-bad-its-good

[downthehatch]

Latest filing in the case shows the problem with Judge Borrok's ruling.

All who are interested should search the case here: https://iapps.courts.state.ny.us/webcivil/FCASSearch

Use docket # 653594/2018.

The latest filing is from a lawyer representing a fund that held shares around June 2018, after the RenRen spinoff of assets was announced (April 29, 2018), but before the closing of the transaction (June 21, 2018) that stripped out the valuable assets, and gave a small dividend to minority holders.

While the Judge ruled that the date of harm to the minority holders was April 29, when the carve-out/spinoff was announced (since as he said "the market is efficient" and after that date holders knew what they would get, and could choose to take the dividend or sell at the then somewhat reduced value, and not get the dividend.)

The new filing, on behalf of a holder as of June 21, 2018 argues that the spinoff was not certain as of April 29, and might never have occurred, and therefore there was no actual harm until the closing of the transaction on June 21, 2018.

While that is a great argument, it points out the difficulty with treating the case as though it is a class action, rather than as a shareholder's derivative action. If you treat it as a class action, as the judge apparently did in his ruling, it becomes difficult to set the date of harm, and doesn't make sense to do it long after the suit was filed.

A class action is established as of a particular time, and the class is certified relative to that specific time, when the case is first brought and the class is certified.

A shareholder's derivative action, on the other hand, since it is for the benefit of the corporation (and, by extension, current shareholders) does not need to determine when any particular group of shareholders was injured, or by how much on what date, since the harm is to the corporation itself, and the benefits of the lawsuit, or a settlement of it, accrue to the corporation.

The settlement, in this case, was structured in a way that it benefited current shareholders, as it should, but also excluded from recovery the shareholders and entities responsible for the bad acts, since they are also current shareholders.

The settlement could well have simply had the payment go to the corporation, in which case the judge would not have been focused on the "record date" which was only created here to deal with the specific issues of this case.

I think this explains why the share price keeps rising, as lawyers likely look at this and see that Judge Borrok's ruling is likely to be overturned on appeal.

[downthehatch]

Another interesting factoid:
At the hearing, when the judge made his ruling, I noted that the Plaintiff's lawyer, Mr. Reid stated there was no law to support the judge's ruling.

He has filed a notice of appeal.

Notice that in the judge's written ruling, filed on 12/31, the judge does not cite any cases to support his ruling.

Like Reid said, there is no law to support the ruling. If there was, the judge would certainly have cited it in his ruling.

I believe the reason the stock keeps moving slowly upward is that as people look into this, they see that the settlement will likely be approved on appeal, and thus the old $25/share value from that settlement is still likely to accrue to owners.

[Chrysanthemis]

Complicated indeed. Now, a few days ago, Renren issued its non-audited H1 results, which brought some additional clarity:

https://www.prnewswire.com/news-releases/renren-announces-unaudited-first-half-2021-financial-results-301451677.html

The Company completed its deconsolidation of Kaixin on June 25, 2021 through Kaixin's reverse acquisition of Haitaoche Limited ("Haitaoche"). Upon completion of the reverse acquisition, the Company's ownership interest in Kaixin decreased from 69.4% as of December 31, 2020 to 33.3% as of June 30, 2021

Here some guesses on my part. When the H1 report was drawn up, Renren owned roughly 47.8 million shares of Kaixin, which (if I google correctly; a big if!) are worth 1.15 USD each today. As there are 1.111 million Renren shares, the KXIN value corresponds to roughly 5 cents per Renren share or 2.22 USD per ADS.

To this comes the value of the rest of Renren, and the H1 results gives a picture of a company which doesn't turn a profit but whose results are improving.

[BottomBounce]

KXIN Kaixin Auto Holdings operates as a used car dealership in the People's Republic of China. As of December 31, 2020, the company had 14 dealerships. It also provides financing channels to its customers through its partnership with financial institutions; and value-added services to its customers, including insurance, extended warranties, and after-sales services. The company was founded in 2015 and is headquartered in Beijing, the People's Republic of China. Kaixin Auto Holdings is a subsidiary of Renren Inc. $KXIN $RENN $BABA $NIO $LI $XPEV $BIDU $WB $IQ

[downthehatch]

RENN and KXIN.
As with everything RENN-related, it's complicated.

Here is the explanation from RENN IR:
https://ir.renren-inc.com/news-releases/news-release-details/cm-seven-star-announces-consummation-business-combination-renren

As I see it, CM Seven Star owns KXIN, and RENN owns 71.3% of CM Seven Star. So effectively, KXIN is a subsidiary of RENN, through CM Seven Star.

[downthehatch]

Well, then there is this from April 2021, describing KXIN as a RENN subsidiary, and describing a large investment by RENN in KXIN convertible shares:
https://www.streetinsider.com/PRNewswire/Renren+Announces+a+%246+Million+Equity+Investment+in+Kaixin+Auto/18230147.html

[Chrysanthemis]

I do not think so. I've read at several occasions that RENN divested its interest in Kaixin end-2020.
https://techonomy.com/2021/08/sofi-battle-wont-go-away/
Ninth paragraph.

[downthehatch]

Yes KXIN is a RENN subsidiary.
I'm not sure what the level of ownership is. I believe it is something like 80 90%, but I'm not absolutely sure without looking at RENN's annual report.

[BottomBounce]

Is $KXIN a $RENN company? says so in the description on yahoo finance. Kaixin Auto Holdings operates as a used car dealership in the People's Republic of China. As of December 31, 2020, the company had 14 dealerships. It also provides financing channels to its customers through its partnership with financial institutions; and value-added services to its customers, including insurance, extended warranties, and after-sales services. The company was founded in 2015 and is headquartered in Beijing, the People's Republic of China. Kaixin Auto Holdings is a subsidiary of Renren Inc. https://finance.yahoo.com/quote/KXIN/profile?p=KXIN

[downthehatch]

Decent recovery from yesterday's selloff.

I think any news is likely to be on the positive side. The worst that can happen is a new settlement that meets the judge's criteria.

I still think some better compromise will be worked out. There are a lot of smart lawyers working for the Plaintiffs here, and the Defendants already agreed to a $300 million settlment.

The Plaintiffs won't let that deal go to waste.

[downthehatch]

I'm looking forward to a statement from the plaintiff's law firm, Reid Collins.
After all the work they have done to get to a settlement, I don't think they are going to give up now.

And while the market seems to be accepting the judge's ruling as the final word, I still believe the judge is wrong on the law.

I've been buying today. There's not much more downside, in my opinion.

[downthehatch]

Well, the first thing to note is that in RENN's 6K filed today, they say the court set another date for a hearing on the motion for January 30, 2022. So apparently, the judge is open to receiving additional briefs on the case.

I also note that at the end of his ruling, the box "non-final ruling" was checked.

So apparently, we have at least one more hearing before Judge Borrok, before the ruling can be appealed. He could change his mind, or be persuaded to change it, but that's not a high probability.

Generally, the parties would have about 30 days to file an appeal after the final ruling, then that appeal would be received and scheduled by the appellate court. Then you have a schedule for filing briefs, generally about 90 days.
Just guessing, but best case is probably an appellate ruling by late summer of 2022.

[Chrysanthemis]

Dear downthehatch,

thank you very much for this thorough and clear analysis of the situation at hand. From my vantage point, it seems exceedingly difficult for the plaintiffs to come up with an alternative settlement which would both satisfy the judge's insistence on using a 2018 record date and secure a decent payoff for themselves, because I believe that they mainly acquired their shares after 2018.

Hence, I agree an appeal seems to be the most likely outcome. Now, sorry to yet again demonstrate my limited knowledge of the American legal system: I understand that an appeal would be heard by an appelate court, which would focus on the possible errors in the judge's interpretation of the law. Would you know what the timing for such an appeal process would be, and what outcomes are possible?

Thank you very much in advance.

P.S. In the unlikely event that you haven't seen it, here a link to the judge's decision:

https://filedropper.com/d/s/Bi7NQmvwMdv3NmuPvWXsbaeQgSjkpW

NB: this is an open file sharing service and as such filled with malware that other people upload, so you will get a warning when you click on the link. However, the link I have posted leads only to a pdf file. I have by the way recently used the same service to post files to the SIAF board.

[Matmak]

40 USD :) to cut my losses, lol.

[downthehatch]

"normal levels"?

The level of the stock is almost entirely dependent on the outcome of the Shareholder derivative action, filed in 2018 by HengRen and some other shareholders.

The settlement that was proposed would have provided a direct payment of about $25 to every current shareholder, but the judge declined to accept the settlement as written.

See my earlier post today for what can happen at this point.

[Matmak]

Let's hope the stock rises again to normal levels.

[downthehatch]

I think there will be an appeal of the ruling. Settlements are favored, and I think the judge made a mistake. Here's my thinking:

While the judge has not filed his ruling yet, I guess we know he had two objections to the settlement:
1) He wanted the "record date" to be in 2018 when the spinoff occurred
2) he thought the $100 million for legal fees was excessive

Let's look at each of these objections, and what happens next, from a legal perspective.

First there are two choices, once Judge Borrok files his ruling, declining to approve the settlement.

1- They can come up with a new proposed settlement, addressing the fees issue and the "record date" issue, or
2- They can appeal jhis ruling

In the first option, the fee reduction would be a positive. The record date is more difficult. To address this, you have to look at the nature of a derivative action.
The derivative action is the company's lawsuit against the directors/ third parties who injured the company by their actions.
If the company settles the action, the payment comes NOT to shareholders, but to the company, since the company is the actual plaintiff, represented by the plaintiffs as a "derivative action"

The problem with paying the company is that both the injured shareholders benefit and the shareholders who actually perpetrated the crime. That's why the settlement was structured as it was, so as to ONLY compensate those who were innocent shareholders.

The question becomes, how do you have a new settlement that only benefits the "innocent" shareholders at the time of the crime or bad acts?

If you say the injury took place at the time of the inadequate payout, then you need to determine how much of the injury was to the company's ongoing operations, and how much was not reflected in the payout. That's hard to do, which is why the settlement made sense. One could argue that the major damage was to the continuing operations of the company, since the innocent shareholders did get a payout, which in today's dollars, and with the ADR ratio at the time, was fairly good. (The plaintiffs argued that in their reply brief to the settlement objections)

Plus, the settlement needs to address the problem of guilty parties benefitting from the settlement.

So it's very difficult to come up with a new settlement that meets both the judge's objections.

I think it's more likely that the Plaintiffs appeal the ruling, and argue that the judge is misunderstanding the nature of a derivative lawsuit.

That is, that a derivative lawsuit is not a shareholder's action, but an action by the company brought BY shareholders, on behalf of the company.

And the only reasonable way to make the company whole is to pay the company today, what the current value of the injury is (the $300 million settlement amount). And then, you pay that only to shareholders who are innocent of wrongdoing, which is why the settlement agreement required a "record date"

That's what I think confused the judge. It's not really a "record date" like the date of a dividend.

It's LIKE a record date because you have to set the date when the proceeds due to the company are distributed, but only to "innocent" shareholders.

So I think it's more likely they file an appeal here, and get an appeals court to look at how the judge misunderstood the derivative action.

So the proposed settlement is a very fair and equitable resolution. given the nature of the action.
I think they have a good shot at prevailing on an appeal, and still making the settlement happen.

[Chrysanthemis]

This was somewhat unexpected. How probable do you think it is that there won't be any settlement?

[downthehatch]

interesting analysis.
And I suspect that you are correct.

[Chrysanthemis]

Now let's consider the number 7.754.623.

This is an interesting number, which I think explains quite well why the price of a Renren ADS oscillates in a narrow band just above 25 USD.

7.754.623, which I will call Z below for brevity, is simply the minimum 300 MUSD settlement amount divided by the approximate 38.7 that the defendants have to pay for each ADS held by a non-defendant.

Now, I would predict that, if the settlement is approved as proposed, the records are going to show that the non-defendants will hold Z ADS's (or something very close) on the record date.

Because this is the optimal number of ADS's that the defendants would want non-defendant shareholders to hold on the record date in order to minimise their losses.

By definition, if the non-defendants hold Z ADS's at the record date, the defendants will have to pay 300 MUSD, which is the least they can get away with.

Assume now that the number of ADS held by non-defendants currently is superior to Z.

Then the defendants have a very strong incentive to buy ADS's at the current 25 USD. Because for each ADS they buy for 25 USD, they avoid paying 38.7 USD later.

Assume now that the number of ADS currently held by non-defendants is inferior to Z.

Then the defendants have a very strong incentive to sell ADS's at the current 25 USD. Because they will anyway have to pay the minimum 300 MUSD stipulated in the settlement as long as the non-defendants own less ADS than Z, and each ADS that the defendants sell now for 25 USD can probably be picked up after the record date for only a few dollars, at most.

On this basis and assuming that the settlement will be approved as proposed, we see that the defendants will buy or sell shares to make non-defendants own Z ADS's on the record date, and the payment for each ADS will be at least:

300 MUSD - 100 MUSD (33% attorney's fees) - 950 kMUSD (costs and expenses) - perhaps 2 MUSD of other administrative costs

divided by Z.

This computes to 25.41 USD, and if the settlement will be approved, this should be the very minimum paid out.

Now, there is clearly an upside to this amount, because if the judge awards less than 100 MUSD of attorney's fees or the remainder of RENN actually is worth something, the gain will be higher. But 25.4 ought to be the floor.

A final thought: if non-defendants currently hold a number of ADS's significantly different from Z, we may see quite some movements before the record date - upwards with a limit of 38,7 if the non-defendants hold too many shares and downwards with a limit of 2-3 USD in case they hold too few (from the defendants' perspective).

But the large number of ADS's that changed hands when the settlement was announced would possibly have allowed the defendants to optimise their ownership without any problems, unless there are some restrictions for some reasons which stops them from buying or selling.

[downthehatch]

Settlement hearing scheduled for Dec. 9, 2021 by Judge Borrock.

[downthehatch]

Given my record this year on RENN, I'm willing to bet that my prediction is more accurate than anyone at the Motley Fool.

I've been right on the future price of RENN ever since I began accumulating this stock last year at under 4.00/share.

It's been a bit volatile over the past year, but the overall direction has been consistently UP!

[downthehatch]

This explains the performance of RENN the last few days, I suspect.
https://www.fool.com/investing/2021/10/13/why-is-everyone-talking-about-renren-stock/

Since very few of us have actually read the court docs, most rely on "analysis" like this moron.

I think he is way off, especially on what the payout will be.

Almost as bad as the Motley Fool article from the week before, that seemed to be unaware of the settlement entirely!!!

Here's the previous article from Motley Fool:
https://www.fool.com/investing/2021/10/11/3-stocks-to-avoid-this-week/

[downthehatch]

Bought some this morning under 25.00..... I think even if the payout is only $25 (which it seems would be a worst case number). there is still at least $2-3 in value in the underlying company, with Kaixin, the chime real estate software, etc.

S0, my calcualtion is that the absolute MINIMUM value here is about $27-28, which means at $25, you have a 10% gain built in.

Certainly not the screaming buy this was at 9-12/share, but in this market, a guaranteed 10% gain ain't bad.

[downthehatch]

Although I am no specialist in this sort of case, nor with the New York Supreme Court, Judge Borrock has impressed me as being very dedicated and interested in moving cases along without delay.

I would not be surprised to see a scheduling order issued today or tomorrow, with a hearing date set before Thanksgiving if the Court schedule can accommodate that.

[Chrysanthemis]

Sorry! It's a pity you had to read through all that - I edited the post within the 15 minutes to add the page with the 33%, but you had apparently already opened the post.

Though I have little experience of legal procedures, 100 MUSD also seems very much to me.

Another question: how long could we expect to have to wait for the judge to issue the scheduling order?

[downthehatch]

Good research!
Had to do a lot of reading to get to the notice that contained that 33% limitation.

The papers note that the lawyers worked on a contingency basis, meaning their entire fee as contingent on a successful result.

Generally, contingency fees are lower in the earlier stages of litigation, and higher when the case reaches the trial or even appeals stage.

But the law also says the fees are to reimburse the fees and expenses of the lawyers.

And the final number, or percentage is up to the judge.

Personally, I think 100 million is high, simply because it is such a large real number.
It's not at all unusual for lawyers in contingency-type cases to get 33% of a settlement or judgment, but it is very unusual for the recovery amount to be $300 million.

Judge Borrock has been a pretty down-to-earth judge in this case. His rulings have been reasonable and straightforward, and common sense.

When you look at the 2 plus years of work the lawyers did, that's a lot of hours, and a lot of work. But $100 million is a HUGE amount of money for a firm to recover, and my sense is that Judge Borrock will reduce that amount to a certain extent.

Frankly, I think the current price is too low.

It looks like the MINIMUM payout per share would be $25.00, and then you still have the existing company, which may not be worth a lot, but is certainly worth at least $1-2 a share.

Plus, you have the potential that the judge awards less than 33%, which you will know once the judge rules, which will be just before the record date.

So I can see why the market is acting the way it is, but the price could go higher.

[Chrysanthemis]

I have been digging around, in particular on Seeking Alpha, and the main reason why the stock is not trading higher is that in the version of the settlement published on the NY court website, the attorneys' fees were set at a maximum of 33% of the settlement amount, plus costs (page 61, point 6, second paragraph):

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=48WNUe//xXJs6bnjh0GyJQ==&system=prod

This percentage (which does not figure in the version filed with the SEC) has been taken by the investor community to mean that the actual fees will be 33%, translating into a payment per ADS of 25.8 minus costs and administrative fees.

The question is how probable a 100 MUSD attorneys' fee would be in this case?

Any views?

[downthehatch]

I suspect it is more about discountuing a future payment.

No ome really knows how quickly this payment will be made, given the fact that it is such a rare event.

Once there is clarity on when the payment will be made and the exact amount, the price will move closer to the setlement amount, I'm sure.

For now, I'm certainly holding what I have.

[Chrysanthemis]

Thanks! I still do not understand why the price gravitates so strongly towards 25 USD.

The only explanation I find is embarrassingly simplistic, apart from the fact that it is wrong or unconfirmed in every detail:

1. The settlement is worth 300 MUSD.
2. There are 24 million outstanding ADRs.
3. Half of them belong to defendants and are not entitled to compensation.
4. 300/12 = 25.

Any other ideas? Possibly my imagination isn't powerful enough.

P. S. the "analysis" provided by Motley Fool made me think that they merit their name over there.

[downthehatch]

Great analysis, and I suspect your estimate is quite close to the actual payout amount.

Surprising to see tha price still hovering at $25, but there are a lot of idiots out there who don't understand what this settlement means, including one at Motley Fool:

3 Stocks to avoid this week- Motley Fool

[Chrysanthemis]

Thank you - the legal and administrative costs were indeed part of the information I was missing. For the record, and to serve as food for thought for other forum dwellers, below my thoughts on the current share price.

In somma, as I read the settlement, the ADS may currently be spectacularly underpriced, despite its recent surge. And we do not need to dig further into the settlement than its fourth page - here a link for easy reference:

https://ir.renren-inc.com/static-files/9ce86392-176c-4ca3-a287-98a2ffb5f0a5

I have entered some line breaks in the quote below to make things clearer, at least for myself:

"In connection with the Settlement, the Defendants will create a common settlement fund (the “Settlement Fund”), which amount, before any reductions for Settlement Fund Expenses (as defined below), will be the greater of

$300,000,000

or the sum of

(a) $38.6866 per ADS (as defined below) multiplied by the number of issued and outstanding ADSs held by Renren Shareholders as of the Record Date (as defined below)
and
(b) $0.859701 per Class A ordinary share multiplied by the total number of issued and outstanding Class A ordinary shares held by Renren Shareholders as of the Record Date.

“Settlement Fund Expenses” include:

(i) any taxes payable on any income generated by the Settlement Fund;
(ii) notice costs, distribution costs, and administration expenses;
(iii) any attorneys’ fees and expenses awarded by the Court to the Plaintiffs’ counsel;
(iv) any other fees and expenses awarded by the court; and
(v) any administrator fees associated with the Settlement.

Renren Shareholders, defined as holders of Renren’s Class A ordinary shares and American depositary shares (“ADSs”), each currently representing 45 (sic!) Class A ordinary shares, as of the Record Date but excluding the Defendants and D&O Releasees (as defined below) will be entitled to receive a pro rata share of the Settlement Fund, after deducting the Settlement Fund Expenses. “D&O Releasees” are individuals that served as Renren directors and/or officers in June, 2018 and specifically identified as D&O Releasees in the Stipulation."

So into the Fund goes 38.7 USD for every ADS and 0.86 USD per Class A ordinary share held by Renren shareholders at the record date. Note that the 38.7 USD is exactly 45 times the amount indicated for each Class A share.

Then some expenses are deducted. Assume perhaps 10% (30 MUSD) as you suggest (and your guess is clearly magnitudes better than mine).

And then the fund is divided pro rata between the very same shareholders, because the definition of "Renren shareholder" used to determine the value of the fund is the same as the one used to determine who is entitled to money from it.

And unless I miss something, it therefore seems mathematically certain that there will be 0.86 USD in the Fund for each Class A share held by an eligible shareholder at the record date, and that consequently that same shareholder can count on getting 0.86 USD per Class A share from the Fund (minus expenses), each ADS counting as 45 Class A shares.

This is also supported by the final part of point 8 of the document (page 21):

The Administrator shall pay or direct the payment to each of the record shareholders as of the Record Date, excluding the Defendants and D&O Releasees, such record shareholder’s pro rata portion of the Net Settlement Amount, which shall be not less than the amount of $0.859701 per share - or $0.826746, if, as set forth below in Section F, Duff & Phelps does not pay the Duff &Phelps Contribution thereby triggering the modification of the True Up definition as set forth in paragraph 4 — before any reductions for Settlement Fund Expenses.

On this basis, the settlement would actually be worth some 38 USD per ADS (minus expenses of, say 5 USD), and the share price should appreciate by roughly one third from current levels, prudently assuming that the rest of Renren is completely worthless.

But the share trades at 25 USD, very precisely, so there may be something wrong with this line of reasoning.

[downthehatch]

Thanks for your thoughtful meassage.... responding here as I'm not premium.

I think you are overall correct, but the big unknown at this point is what the administrative and legal costs will be.

While I suspect the curren 25.00 price may still be below the eventual payout, the legal expenses allowed by the court to the Plaintiff's lawyers could be substantial, as they have been working on this for almost three years, and there are 4 law firms listed for the Plaintiffs, including Reid Collins & Tsai.

Adminstrative expenses are not likely to be too much- maybe less than a million. But legal fees allowed could well be in the 20 million range, which would reduce the payout by 10% or so. Of course this is a wild guestimate, but simply looking at all the filings in this case, and the voluminous exhibits, tells me there are a LOT of billable hours that they will try to have included in epxenses.
That's the only big ?? at this poimnt, IMO.

[downthehatch]

Part of the equation always has to be that the payment is some time in the future- which is not precisely known.

So there is a time discount.

Second is the uncertainty of exactly how much the payment will be, and that has yet to be precisely calculated.

I suspect we'll get more clarity in the coming week, as many of these issues are not difficult to figure out.

Then there are the tax consequences, which always have an impact.

Lot's of moving parts- probably why the price bounced around so much Friday.

[Chrysanthemis]

Curiouser and curiouser! cried Alice.

I still fail to understand why the ADR is currently traded at 24 USD.

[Chrysanthemis]

Still trying to assess the value of the settlement. Two more intriguing jigsaws:

1. The ADS, both according to the settlement text and this SEC filing, currently represent 45 shares of ordinary Renren shares, not 15.

http://edgar.secdatabase.com/1952/110465919071845/filing-main.htm

The amount to be paid into the settlement fund is around 38.7 USD per ADS and around 0.86 USD per ordinary A share.

The ADS and ordinary shares held by defendants do not count and they are not entitled to any part of the payout.

2. The settlement contains provisions for a situation when Duff&Phelps will not pay, in which case the minimum 300 MUSD amount will be reduced to 288.5 MUSD.

[downthehatch]

Glad for your good fortune.

I'm not sure about the numbers, because I think the share count is for the actual Chinese company, and the RENN shares we can buy are ADR's, 1 share representing 15 shares of the Chinese stock.

and also, not sure what the insider count is as of the settlement date, which is the date that counts.

So while you may be right, you may not. Apparently, the market isn't sure either, as the price swings today indicated.
I sold some, and kept a chunk, since I'm not sure myself.
P.S. Feel free to give me a great tip sometime, to thank me!!

[Chrysanthemis]

Dear downthehatch,

First a very big thanks to you for drawing my attention to this stock. I bought shares at 9.03 so I've more than doubled that money, much thanks to you.

Now, thinking about what the settlement can be worth, I remember you writing that 49% of the stock is held by insiders (in April, though). From what I understand, the settlement provides for a cash payment to the minority shareholders only, not to insiders.

Thus, with 24 M shares outstanding (iHub's figure) the minority owns some 12 M shares. Then the settlement should be worth at least 25 USD per share, which at current levels ascribes a negative value to RENN.

This seems strangely low. What do you think; do I miss something in my back-of-the envelope calculation?