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If that is true that would do wonders for any legit companies left. Either they get bought out and a price higher than now, or they rise with the tide.
Adam
CSR They have a serious A/R issue and therefore have had a cashflow problem forever. The A/R is almost exclusively with government so they should eventually collect it. Even at $6.50/sh the deal is still below book value.
I have no position at the moment, but am considering it if it drops further.
Adam
CSR I agree, not a great deal by any means.
Adam
CSR The CEO is the buyer, so it's not really a buyout but a going private offer.
- Adam
CCCL - I guess I should have said 'I' expected it today. It was more of a general comment, I know it doesn't always work that way. I also know the stock has been in a downtrend for a while now and today could just be a continuation.
I enjoyed your discussion last night, so hopefully no offense.
Adam
CCCL - It was expected since the company was discussed on this board last night. Anytime a company is talked about now on this board it gets a bullseye put on its back for a short while since attention will be drawn to it. Same thing happened in reverse when this sector was doing really well, the stock discussed would get an immediate pop.
Adam
O/T - For the kids in us this is kinda cool
http://tv.gawker.com/#!5783387/amazing-lego-ball-contraption-breaks-world-record
-Adam
I was reposting from Yahoo Message Board. They were not my thoughts. Just made me think a bit.
I am expecting the worst in regards to CCME, don't get me wrong.
-Adam
Why did CEO stonewall Deloitte?
That seems to be the question. Jacky and Dorothy obviously didn't agree with Mr. Zheng's end decisions, but it doesn't mean they agreed with Deloitte either. It may very well just be a difficult situation they preferred to distance themselves from.
So is Mr. Zheng:
1) Hiding something, which we will find out with Nasdaq's decision.
2) Believed Deloitte was beyond unreasonable and refused to comply with their demands(against the advice of the BoD) and maybe hoped they would back down (but they resigned instead).
I am not leaning towards either option at the moment because I really do not know. I have come to expect the worst though, and as such do now.
-Adam
Well it took you 10 seconds to get on my ignore list.
I know no one really cares or has the energy to care at the moment(and the CEO may very well be out to screw us), but there are still numerous unanswered questions. Here are two statements Beancounter from YMB wrote about the Deloitte cash issue:
1) I am having a problem with D&T's statement about the bank confirmation process. As a big four auditor for over thirty years I would say that confirmation of cash is the most basic part of the audit. You get independent verification from the banks involved at the audit date. You can also do a "proof of cash" by analyzing all of the sources of increases to the cash accounts, and the sources of distributions of cash from the cash accounts. While auditors do request representations from management as to certain things, I would hope that D&T wasn't just asking management to represent that the cash existed. The proof of cash would also send up a red flag if the company was borrowing funds off the books just to window dress the balance sheet. Why D&T couldn't do the forensic work on cash that they may have considered necessary just makes no sense. If you ever suspect fraud in a company, verification of the sources and uses of cash should be the primary focus of the audit! If D&T did insufficient work in 2009 to verify cash and the accuracy of the F/S, you would think they would step up and do the forensic work on their "own nickel"!! The conduct of D&T is a real mystery to me. I should think they have real liability on this issue. Even if there is massive fraud, there are plenty of examples where this has not sheltered the auditors from legal verdicts.
2) Cash confirmation is usually the first thing done in an audit. In fact the cash work is usually done at an interim date(ie. Oct-Nov.) and then again at year end. During interim you test the systems that support cash receipts and disbursements to determine if they can be relied upon. Assuming that cash is independently verified at year end, the auditors may have done additional work to review bank statements for the year to ascertain that there were not any large unusual increases in cash balances that didn't flow from accounts receivable or other normal operating transactions. In light of the allegations, such additional work should have been expanded beyond testing to a higher level of verification. To me this seems like basic audit work as opposed to hiring a forensic accountant. Frankly I would be embarassed as the primary auditor to admit that I couldn't verify cash to my satisfaction!
-Adam
CCME - Jacky's resignation
I agree. He either missed something, or screwed up which caused DTT to resign and therefore could not in good faith remain CFO.
-Adam
What did you expect when you came over to chime in? The people on this board have been attacked incessantly for the past 1.5 months and the attacks are not of substance, quality, or merit.
Your first sentence compared CCME to RINO, and except for them both being U.S. listed Chinese companies they are not comparable, but you have to know the company to know that.
You are right that it's a bit of a cult stock(a definite negative because it attracts attention as we have witnessed) and you can freely avoid it for that reason, but don't just come over and say 'fraud' just because it's halted. We have no way of knowing the reason for the halt.
-Adam
Switow.com was working late last night, and just for interest there are a great deal of comments on products now, a few dozen at least, and that was not the case last week. I noticed quite a few comments around the first week in March, so perhaps they are beginning to role out the magazines.
FWIW, comments can only be made by paying customers, and quite a few of the larger items(t.v's, laptops etc) have a comment.
-Adam
CCCL - I liked that too, plus these other two points of interest weren't too bad either:
'Cash and bank balances were RMB 263.5 million (US$ 39.9 million) as of December 31, 2010'
'The Company's backlog of orders for delivery in the first quarter of 2011 is approximately RMB 323.2 million (US$ 49.0 million) representing a year-over-year growth rate of 33.4% compared to the first quarter of 2010. The expected sales volume in the first quarter of 2011 is approximately 11.5 million square meters, representing a 30.7% increase from 8.8 million square meters sold in the first quarter of 2010.'
All in all the company is executing very well on their predetermined plan.
-Adam
Dollar-wise, the short is smaller than a month ago. At the moment with 7.8M shares short the dollar value is approx. $100M. And when there were around 6.5M shorts the dollar value was roughly $130M, so a difference of $30M. I don't know what the average cost basis is, but just thought I would point it out.
-Adam
'a Little dip and then a greater positive correction'
Nice play on words ;)
-Adam
Yeah, the term 'research' has become mighty diluted, and now it's legitimate dd if you 'hear from a friend of a friend of a friend'.
-Adam
Number of employees - FMCN vs. CCME
FMCN - 4800 Employees
CCME - 170 employees
'CCME's selling expense is only 3.5% of revenues vs. Focus which is over 20% of revenues. How can they maintain such a high margin without any selling expenses?'
Maybe you should invert your thinking and try to understand why Focus Media's network costs so much more to service and maintain than CCME's. The answers are in FMCN's filings. You should go read some of them, it will help you understand why the two companies financials are so different.
-Adam
Rick - Selling expenses. FMCN's selling expenses average more in the 15% range, and only recently spiked in 2009. Reasons are listed below. If you actually pull up a FMCN report you will notice there is a lot of waste(expenses), and they have made some mistakes which continue to cost them. You cannot accuse CCME of fraudulent behavior just because it's closest competitor makes poor acquisitions, pays out a lot in share-based compensation, and has a fragmented advertising network that costs more to operate and requires more selling expense to fill with ads. Here is a description of their services 'Focus Media provides a broad portfolio of media advertising platforms, including our Commercial Location Network, In-store Network, Poster Frame Network, Movie Theater Advertising Network, Outdoor LED Network, and Internet Advertising.' That's six different platforms, compared to CCME's one platform. Which do you think is more costly to run?
From FMCN's 2009 annual report:
Selling and Marketing. Our selling and marketing expenses primarily consist of salaries and benefits, including share-based compensation expense for our sales staff, marketing and promotional expenses, and other costs related to supporting our sales force. Selling and marketing expenses accounted for 14.8%, 14.9% and 21.2% of our total revenues in 2007, 2008 and 2009, respectively. The increase in selling and marketing expenses both in absolute dollar terms and as percentage of total revenue in 2009 compared to 2008 and 2007 was primarily attributable to following two factors: (1) we had to spend more as a percentage of total revenue in marketing and promotional activities to counter the contracting customer demands for our advertising services under unfavorable macro economic conditions; and (2) we incurred more share-based compensation expenses due to our modification and cancellation of the 2007 employee share option incentive plan, which was modified in October 2008, and adopting an employee restricted share incentive plan in 2009. We expect that our selling and marketing expenses will increase in absolute dollar terms in near term compared to 2009 due to the "2009 Replacement" incentive plan described in further detail below in "Share-based Compensation".
-Adam
Rick - The General and administrative expenses were lower because a currency exchange gain was applied to offset some of it. Their was approx. a 1.3% exchange rate gain during the quarter. As you will notice by looking at the Q3, the G&A expenses for the first nine months are a more respectable $2.5M.
I will add: when you have $170M in the bank, a 1% exchange rate gain equals $1.7M.
'CCME only spent $228,000 on admin expenses for all of Q3 (vs $57m revenues). That does not seem possible.'
From Q3:
General and administrative expenses. General and administrative expenses decreased by 61.2% to $228,000 for the three months ended September 30, 2010 from $588,000 for the three months ended September 30, 2009. The decrease was primarily attributable to exchange gains.'
-Adam
Look how complicated Enron's corporate structure was. Herb is comical when he compares CCME to them.
http://www.trinity.edu/rjensen/theory/00overview/speoverview.htm
-Adam
Actually I read it as though MW was insulted(pride hurt maybe?) by Herb's suggestion they may have been 'hoodwinked', and therefore defended themselves accordingly...and in the process pretty much squashed Herb's theory that the company did unethical things by trying to play tricks on MW.
-Adam
Herb comments on lots of things he does not have in-depth detail on(but keeps it vague on purpose), but he will just say after the fact that he was trying to protect the average investor by pointing out unknowns and potentially risky investments. He will also say something along the lines of 'better safe than sorry', and will refuse to apologize for incomplete research based on this reasoning.
JMHO
-Adam
Maybe Herb was the one who was hoodwinked by his shorty buddies and he is in damage control of his own.
I love how Herb avoid Occam's Razor when trying to explain what is going on. He develops a conspiracy theory about a reverse-sting instead of the more obvious conclusion that MW is just full of it.
'However, since Greenberg is well connected to shorts it suggests that they are in damage limitation mode, that is a good thing.'
Occam's razor (or Ockham's razor[1]), often expressed in Latin as the lex parsimoniae, translating to law of parsimony, law of economy or law of succinctness, is a principle that generally recommends selecting the competing hypothesis that makes the fewest new assumptions, when the hypotheses are equal in other respects.[2] For instance, they must both sufficiently explain available data in the first place.
-Adam
Wild animal backed into a corner
Shorts are the equivalent of a wild animal backed into a corner and, as such, will fight until they can escape or are killed/caught. And trapped wild animals are unpredictable and vicious and may get a couple wins over their combatant via scrapes and bruises, but it doesn't mean they will win the battle(or even if they think they can win). They will fight no matter what so longs might as well expect it to happen.
And also, a wild animal is as good as dead if they show any sign of doubt or weakness, so the shorts must keep up an appearance of strength otherwise they will write their own ending.
And the only way they can show strength anymore is via share price action with shorting and puts since article writing no longer has it's desired effect.
-Adam
I initially thought altering the earnout somehow would be beneficial, but Fernando and Rato are correct when they say it is not a decision a successful business owner would make. It actually has begun to make me question why AutoChina did it. It's short-term thinking and perceptually indicates that the recipient of the earnout shares does not wish to increase his ownership stake in the company unless(as Fernando states) he never thought he would earn the extra shares in the first place.
A secondary on the HK exchange(if priced at a respectable valuation) using 7M earnout shares is definitely more appealing as it would allow Mr. Cheng to diversify his holdings without having to sell on the open market, as others have stated it would allow an investment bank to finally get paid(meaning: CCME would finally get a chance to pay the piper) and perhaps extra analyst coverage and institutional buying would ensue.
-Adam
I just took a peak and CCME's fall run corresponds quite well to the Shanghai fall run. I know it's not much, but I would have to bet that many hedge funds are lemmings with herd mentality who prefer to go with the popular sentiment instead of against it. If the Shanghai continues moving up it increases their risk with regards to their short position and the FUD shifts slightly into their corner.
CCME's fall run(using closing prices):
Bottom - Sept 15th @ 7.83
Top - Nov 8th @ 21.25
Shanghai fall run(using closing prices):
Bottom - Sept 20th @ 2588.71
Top - Nov 8th @ 3159.51
-Adam
I highly doubt it was Waldo. He's thoroughly convinced the company is a fraud based on the SAIC filings not matching SEC filings. He hasn't mentioned much else in his ramblings about CCME.
As for the audit guidelines, you can almost cut and paste what was written in that article about audits from Wikipedia. It doesn't require a CGA to write what was written.
They probably googled 'audits' and 'fraud' and the SAS 99 popped up so they used it. Actually I checked, the below link is #9 in my search results when I did this.
http://en.wikipedia.org/wiki/Statement_on_Auditing_Standards_No._99:_Consideration_of_Fraud
-Adam
Based on the information he decided to include, my guess is it's either a copycat of MW, or MW in disguise. It could very well just be a copycat since we are getting a lot of the 'pile on' effect with these short articles. Everyone wants their 15 minutes of fame.
-Adam
It was a classic rehash article, but structured in a way to make it seem like it was new. He wanted to have his voice heard again.
I do however agree with the delay tactic. I personally think Deloitte will take it as an insult to have someone dictate instructions to them about how to do their job. I would have if I was them.
-Adam
Detecting Fraud - Enron
No wonder the auditor didn't see the Enron train wreck coming. Look at the graph in the link. Wow is all I can say.
And people think Deloitte will screw up CCME? CCME is a walk in the park, especially with it's balance sheet the way it is.
http://www.trinity.edu/rjensen/theory/00overview/speoverview.htm
-Adam
Here is my take on the SAIC issue.
Below is a post I did in response to Waldo Mushman. Based on what I've read CCME's SAIC financial data probably is not accurate. So I came up with a plausible reason for it not matching SEC data, and also am searching for whether CCME will get in trouble because they did this. Personally I think it's a non-issue since I doubt their are any ramifications for the discrepancy, but I thought I would pose the question to see if anyone new any different.
Here is the post:
I have searched high and low but could not find any legal ramifications for having inaccurate financial date on the SAIC filings. Could you be more specific with your links and point directly to where it states it's against the law and what the ramifications are? That would be helpful, and I figured you must already have this data somewhere so it should be easy for you.
Also, I could also not find information anywhere about your following statement:
'The ramifications are you don't get your business license without the local and nation tax offices approving the filing. The SAIC gathers approvals from all the relevant parties, including the SAT, before the license is reissued. It the SAT doesn't agree with the tax numbers reported to the SAIC they won't sign off on the Annual Report. This continues to be lost on the critics of the SAICs. it takes approvals from 8 -10 seperate government agencies before the SAIC is satisfied.'
Where did that come from, and does this mean you are most concerned with CCME not having their business licence renewed in 2011 and therefore will have to close down?
Also, you state
'The SAIC filing for the 2-3000 companies listed on the HK and Shanghai exchanges match what is filed in the shareholder reports. Why is it only the promoters of the RTO's who claim the SAIC is meaningless? Why would a company submit false documents in China when it has become common knowledge that short sellers will attack the company if they don't match but leave them alone if they do match the SEC?'
Those are all publically listed companies. Did you check the SAIC filings for those public companies before they went public, and when they were smaller in size? As you yourself stated 'The SAICs are openly available to anyone who wants to get a copy.', and since you have been a business owner before you would understand the hesitation of companies to put accurate financial data on SAIC business licence documents which may not require accurate data. It would be providing your competitors a huge advantage if they knew how well you were doing. Success breeds copycats and competition, and if the SAIC documents are as readily available as everyone says it would be a smart business decision to under-report all financial data if it was allowed, especially if you are still small since smaller companies are easier pray. Look at Google as an example, nobody knew how profitable they were until they went public but by that time they were large and difficult to compete against. I only use Google as an example and not as a comparison.
Many of the RTO's are fairly new public companies and many have publicly stated their SAIC filings will begin to match their SAT filings since it has shown to be of importance to the US investing community. Now that they are public US companies they cannot hide their financials from their competitors and therefore are making the necessary adjustments to their SAIC filings when the time comes.
That is just a thought as to the potential inaccuracies involved with the SAIC financial data. It does not mean they are not paying their taxes because I believe it's the SAT filings which are looked at for tax information, and(from what I have heard) those are not publicly available.
So my question again is do you know if there is any legal ramifications for having inaccurate financial date on the SAIC filings, such as you stating they will not get their business licence renewed. I ask mainly because I have come to the conclusion that CCME's SAIC financial data could very well be under-reported since it would be a wise business decision(due to how readily available those filings would be to competitors). I don't know for sure, but am trying to find out if any laws exist which will penalize the company for doing this.
-Adam
It's just a thought process that Glen used. I wouldn't look to much at what was actually said, it's a thought sequence. Similar to a criminal investigation where you try to find motive and intent when looking at potential suspects. The crime is usually committed by the individual who was going to gain the most from it(was the most motivated to commit the crime). That motivation creates intent and the crime begins to make sense as to why it happened in the first place.
Right now all the fingers are pointing at CCME because it is the one being accused of committing a crime, but as we are seeing the last day or two the true motivations of the hit piece authors and short sellers are beginning to surface and they may eventually be put on 'trial' per say. Their intent to inflict harm(frame CCME for a crime) on CCME in order to profit(or avoid loss) is beginning to seem much more plausible than the CEO(and other insiders) attempting to profit from fraudulent behaviour, especially with the Starr deal in place.
I am 100% behind CCME and have been the whole time, but I'm willing to do thought experiments like this because it helps put things in perspective and potentially could highlight things I otherwise would have missed.
Sidenote on potential motivations of hit piece authors:
As for the stock price movements, everyone is expecting and waiting for the next hit pieces to come out and will act after the fact. I personally expect Muddy Waters to do a #2 since they had the most dramatic effect on the stock and even if the second response it dampened, it still might be enough to profit from(I think they will make it a long multi-page report like before to make it difficult to discern quickly whether they are presenting erroneous info again or not). Citron I think will not publish their expected #2 since I doubt it will do anything since their 1st was(IMO) the weakest of all the hit pieces. And Chimin has already tried with a third today and it did nothing, so his ability to profit is basically gone. I expect Bronte may actually come out with a positive piece eventually because I bet he probably knew what all the potential short arguments were ahead of time(via the short network community or his own analysis), and probably tried to create a hit piece of his own and came up empty because he realized CCME is not covering up anything(and he wasn't willing to forge documents). His article was more of a wait and see, so I think he may switch sides once the dust settles.
The Cash Issue:
I'm really curious if any of the authors will tackle the cash issue because right now it's a sleeping giant. The shorts know if they can fabricate a plausible fraud scenario for the cash they may be able to profit from it, but they also know that by creating a direct allegation against the cash, management will have to respond and could provide damning proof of legitimacy too quickly for them to cover their short position and so their is a risk of some loss. Right now management doesn't have to provide proof of the cash because nobody has publicly asked for it. Management may proactively show proof, but that's a different discussion.
Should We:
Perhaps us longs should make the cash question public via an article. Push the shorts into trying to prove something which(I'm sure) they don't want to have to prove. It will draw attention away from all the misdirection and fallacies they keep presenting and get investors focused on a hard fact which is virtually impossible to refute given the size of the cash balance.
-Adam
Chimin's article is being questioned by SA, here is a link with article removed, but comments intact.
'This article has been removed pending the author's response to a dispute about its accuracy.'
http://seekingalpha.com/article/251253-red-flags-at-china-mediaexpress-significantly-mismatched-filings-in-china-u-s?source=yahoo
I know everyone already knows this, just showing the link to the comments if people want to read them.
-Adam
I second justin's thoughts. I may not always agree with what he says, but I ALWAYS read it(and sometimes that takes a long time, hehe) just in case I have missed something with my own analysis, or I have a chance to learn something completely new which happens quite often. He's a bit more macro-based than I am and he has been a valuable contributor to my understanding of the world economic situation, especially when there are numerous unpredictable events such as we have right now. You never grow as a person if you only have people around you who are just like you.
Rato, please continue being exactly who you are and saying exactly what you say, this board is much more valuable with you apart of it.
I respect your decision to step down as moderator, but I vote to restore your spot if you change your mind, so my vote goes to rato.
-Adam
'All loads have been shot'
'I believe they have several loads of their own to fire'
'shorts shot their load during the Holiday'
lol, are these comments by you two just a sneaky way to get the SEC to start doing their job? Perhaps these posts will accidentily show up in other google searches they may be doing while at work ;)
-Adam
My guess is since MS is part of the investment community they probably knew attacks may eventually come and decided to keep their clients clear of the potential volatility(even if they knew the allegations would be unfounded).
As you well know, volatility is very scary for a lot of people and many investors would rather sit on the sidelines and potentially lose some upside than have to go on the rollercoaster ride in the first place.
MS protecting their clients from potential volatility is very plausible in my opinion.
-Adam
And don't forget, insiders sell for a variety of reasons but only buy for one reason - they think the price is going up.
Also, welcome to Ihub and your first post.
-Adam
Glad you posted that. Everyone keeps forgetting they are still on holidays. Some think that is not important and they should abandon their families on the most important holiday of the year to respond to a bunch of baseless lies authored by known criminals and biased profiteers.
They have already responded three times during the holiday, but I guess that doesn't count because the price is still going down.
p.s. These reports are not real threats to CCME because they are so full of s*it. If the company had a real problem, you know management would drop everything and be in the office in hours dealing with it.
-Adam