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It’s pretty obvious they didn’t do months of DD nor did Paulson with Sino forest.
With regard to Piper/PWC, after doing what he did, Cheng wants to seen to be doing what he should for shareholders.
What he did was rip shareholders off. He wants to seem to be doing what’s expected of him, to protect his back probably or maybe make some more money from stock he has bought at rock bottom, since he alone knows how much of a business this is.
Ping Lou visited China for 4 weeks, came back and wrote up reports on 15 – 20 companies that she talked to and people believe that she actually had time to also singlehandedly check out and confirm 50% of CCME’s customer base! I don’t see how her ‘reports’ can be given much credence.
I think she got fired for not actually doing independent DD but relying on management statements and referrals to those who would lie to her, for a bribe = china business practice.
The person that should have been fired was Dorothy Dong who - unlike Jackie Lam, who had no authority in the company to even check the bank balances – she had, with the large Starr investment, much more authority to be asking questions and demanding answers to assure the security of Greenberg’s investment, than she obviously did.
Starr know next to nothing more than you and I, except that they’ve been ripped off, as Greenberg virtually admitted yesterday. Seems we give these big investors too much respect for their so called DD.
You’re betting on a binary outcome i.e. there is no or only minimal wrong doing v’s outright fraud.
You are in the same position as longs were before the halt, who were waiting for the binary outcome of a clean 10K or whether the shorts would have made the correct bet.
Trying to insinuate the motives for the actions of DTT or Cheng does not constitute DD.
What happened was DTT resigned for lack of co operation and Lam and Dong resigned for that same lack of co operation. That should indicate where your mistrust should lie and it ain’t with DDT.
Don’t make the mistake of betting too much as many of us longs did before. Because you are betting, not investing.
There is, and has been, no news.
Thanks Chris, appreciate your posts.
WCT thanks for the reply. You said :
And Cheng Zheng expressed a reserved befuddlement... he seemed clueless.
That doesn’t say much about the guys’ character. I’d like to know your impression of him as a person.
That seems important to me as the scam depends on the personality of the scammer. Was he a hidden kind of guy that you couldn’t get to or relate to?
Did he have much to say or only when he needed to respond?
Did he seem like the shifty evasive person that could do some of the things it looks like he’s done?
On what you knew of or thought of him, does what has transpired greatly surprise you?
I sold out at the resumption but surprised this has not been more tradable. I’d be surprised if the business that exists is not worth more than $1.12, so it seems to me there’s some opportunity here on some positive news.
Hey WCT I hear that you don't trust management now.
I'm interested as one who met him and was able to communicate with him, what was your impression of Zheng Cheng as a person back then?
What did you make of his character?
I put some creedence into his claim to be buddhist,looks like he's knowingly created suffering in others lives = bad kharma if he really believes that.
Sure seems like he's not what he appeared to be, did you pick up any inklings or indications from him.
To be honest, all I care about is a share buyback. Nothing else.
They have paid high multiples for their previous acquisitions, yet they don't want to buy their own stocks? They are the only ones who know exactly what their shares are worth.
Surely this says it all.
They say other acquisitions are too expensive now but they now have the chance to buy their own stock at a bargain multiple.
Surely that’s the best investment they could make right now.
The resulting rise in share price would ultimately allow them to reissue stock at a much higher multiple later to fund acquisitions.
They expect Bromine prices to be flat for a time so they have time to support and build up the value of the stock without any need to worry about spending on more properties until after the stock is worth a lot more to sell in a raise.
If they are not buying their stock at less than 2 x earnings they are not kosher IMO.
Especially since they are being advised to do so by CGR/ Coulson and by now even the most out of touch chinese managements are aware of the need to do something to show Mr Market they are what they claim to be or their mark cap gets decimated.
Just a few thoughts FWIW.
I think Cheng bringing Pipers/PWC on board suggest he realizes he can’t get away with trying to avoid facing up to the consequences of his greed.
He’s not stupid so he hasn’t missed seeing how the market has shown what it thinks about dishonesty and lack of transparency in this whole space right now.
But he must think the company is worth more than it would be if it went pink, since it seems that he’s trying not to go OTC.
There is no way around the fact that in this environment of mistrust towards these Chinese small caps now, the market will accept nothing less than a forensic audit to validate this company, even if that means ultimately validating a smaller company than the CEO would have had us believe, maybe in his attempt to make his earn outs.
Assuming they ultimately come on board to do a full forensic audit, I think PWC will want to check the DDT concerns first, why reinvent the wheel.
I think it’s highly probable that the cash has been used for his pecuniary gain in some way/s.
I also think it highly likely that the company is smaller than previously stated, either in revenues/ number of buses or likely both.
PWC will have to check out all the bus customers to verify how many buses and how much revenue is derived from them.
I can’t guess if he has sold undisclosed shares, if so, then he knew back then that the Co was not worth what the long market thought it was and profited from that at longs expense. It looks like that’s what the Lin’s did, so why not Cheng also.
I think he’s now realizes that he has no choice about coming clean to stay listed and also realizes that to get full value for whatever his own shareholding remains, he will have to go through the process of a stringent audit process, warts and all. Half an audited Co in compliance on NAS will be worth more than an untested assumed to be scam on the pinks.
I think there has been an assumption by Chinese management that they can just carry on with Chinese business practice ways that contravene accepted standards of listed company practice and also reveal a level of contempt for shareholders interests, if not an actual rip off of other peoples’ money.
I think seeing their own shareholding value decimated has been a nasty surprise and a wake up call for these CEO’s and management teams to the need to moderate and modify their autocratic arrogant and self interested greedy ways, since their actions have come home to drastically hurt them in the pocket also.
At least for the ones that aren’t total scams and CCME does have a business at least 50% of what it has stated I believe at a guess.
I think they have overstated the airport bus margins/used the cash for personal profit/lied and deceived Starr in order for the Lin’s to unload/deliberately kept the previous CFO in the dark to enable the above plus whatever else they may have done.
But if there is still at least a 50% business liable to earn maybe $1.20 – 1.50 in 2011 it will be worth a PE of 10 (once this space has been cleaned up over the next few years) and these numbers will grow with the business.
So giving it an intrinsic 10PE now = $12 – 15 intrinsic value now, even if to be realized only over the next few years or hopefully less time as this sector sorts itself out.
It’s ultimately an advantage to CCME to have to go through such scrutiny as it will end being proven clean (after it has been cleaned up) and this clean up process will have to happen to this whole space, or anyway those that refuse to be thoroughly scrutinized will be assumed as too risky, whilst the others will be rewarded and ultimately trusted, so long as management also realizes the need to be consistently communicative, reliable, honest and shareholder friendly. I hope.
It’s come down to hope. Unfortunately my unquestioning assumption that the market facilitators and regulators would protect and regulate shareholder interests was unfounded. As was my naive assumption that Chinese management would have a certain acceptable level of business ethics and shareholder interest as would be expected from similar US management.
Since they were signed off by DTT in 2009, started SWITOW, are still hiring and investors on the ground have seen their screens in buses, I don’t think the company is a total scam.
Since DTT, Starr and Lam resigned and they got out of compliance and have not been communicative with shareholders, some things are not right or outright bad.
Some well connected shorts (and I don’t believe Carson Block and Andrew Left fit that category) who were prepared to pile on big with puts and naked shares (i.e not retail) realized there are problems in this space and with CCME.
However I think the truth lies somewhere in between the Gorilla/ Scam extremes, as will the ultimate share price. CCME may never be worth $50 or $100 as I have seen both Ratobranco and Bradford post previously here, but nor will it go to zero as Ratobranco’s kneejerk favourite clarion call now.
It probably (but may not, and anyway we will get a better feel for this as events transpire, even before it resumes trading) has a genuinely profitable, growing niche advertising business and probably has substantial cash.
In my opinion on the weight of probabilty(any one's guess!)it probably does not have the stellar margins and metrics it boasted but is still a good investable business.
Assuming it's half of what it has claimed to be and I’d personally be surprised if it was less than this and not surprised if it is 75%+ of what it claims to be, since the DTT concerns are more around the cash and certain possible related party transactions issues though also they raise nefarious unproven and investigated size of business doubts.
Also it will get a more generous PE in the future, at least 10 and maybe as high as 20 or more, as sentiment can and usually does change to the opposite extreme at some time.
Whilst this generation that has seen so much grief in this investment may largely want to get out, a patient hold may yet see a money back type return and a handsome profit for the new generation feeding off the fear and disappointment of now.
IMHO FWIW.
You're missing the fact that in China you 'buy' a report like this, just like you buy a fake bank statement.
OMG he's going to try and fudge everything, he's not as smart as I thought.
Cheng continues to block any attempt at transparency. Since he has now presumably (inadequately) explained his reluctance to do so with 4 separate parties - DTT, CFO, Starr and now head of the Audit committee - and all have resigned in protest, the weight of numbers evidence, strongly shows he’s the party at blame here, since his logic and reasoning for his stance (or refusal to elucidate them) have been rejected by all 4.
CCME is either a very good business or a very good scam, either way Cheng has shown he is not stupid. Thus he knows full well what will come out in an independent investigation and the consequences of such.
Since he’s not so stupid as to be stubborn and recalcitrant as to behave in a manner that would decimate the value of his own shares, if the company was a substantial reality and above board, he knows he has something/s really bad to hide.
He may be hoping to keep the charade going well enough to sell his own shares on a resumption at a better price.
I was hoping there was a substantial reality (50% business 50% cash or similar) but Cheng, by his continued stonewalling of any substantial, independent scrutiny, suggest a much more substantial fraud.
The only other reason I can see for him lodging an appeal, whilst also maintaining his clear intention to block the necessary forensic level audit required to pass muster, is face saving, he will watch CCME go down in flames saying - they did it to me! and he will never be shown clearly and irrefutably, to be the fraud and liar that he is.
Yes that's also a possibility for mine, since I also don't buy the theory that he went short himself.
Since there's obviously been deception, because these companies have been able to get away with it up to now, it stands to reason he may have been expecting to get away with again this 10K, since he was 'smarter' than DTT last year.
That kind of arrogance may make him want to get back at the shorts or maybe time to manufacture a good enough story to get out at a higher price himself.
He certainly don't appear to be no Buddhist!
I hope they just come clean.
They‘ve brought more time with the appeal but they‘ll still have to present a 10K to be compliant to get relisted.
The only 10K that any respectable auditor will sign off on will be the equivalent of a forensic.
It appears that DTT was asking for at least something along those lines, and since the DTT specific concerns have been made public, presumably any decent auditor will want to see those DTT concerns addressed also.
If the CEO could not agree with DTT about addressing these issues, why will he do so now?
Is he now prepared to fess up to a smaller business, but one in which his shares are worth more than a pink business?
Dong and Lam resigned, making their disagreement to CEO attitude clear in their letters, and in terms of credibility and worldwide reputation, DTT wins hands down against this CEO in ‘who should I believe?’
The notion that DTT bailed on the company under pressure just doesn’t hold logic with me.
DTT is much bigger than shorts or Deloitte watch
DTT is much bigger than CCME or it’s concerns
DTT does not follow CCME/shorts/ China small caps – like retail investors do
There are justified, widespread concerns in this whole sector about the veracity of the whole sector, not just a number of businesses, DTT had every reason to want to dig deeper this year as should all auditors in this space be doing.
DTT was asking for more information on these issues for some time, it was the company’s responsibility to provide the requested information/address the concerns on time.
I don’t think any would have taken a lot of time to be addressed, such as verifying cash with bank head office etc.
The company failed to meet the DTT request which is why DTT waited as long as they could before finally pulling the pin on the Co. But it was CCME who failed DTT it seems to me.
And Dong and Lam resigned because of this upper management refusal to be transparent from the tone of their resignation letters.
So the way I see it with this appeal.
Either the CEO is hoping to find a ‘friendly’ auditor, or is now, after some reflection on what’s best for him or maybe professional advice that the markets just will no longer allow him to not be upfront, is prepared to restate to the actual reality of the business or maybe he’s just mean spiritedly misleading his investors right to the bitter end.
The way he has not been true to his word so far, makes me not discount the last possibility at all, it may be the zenaphobia is coming from the China end on this one.
I write to help clarify my own thoughts and only post my thoughts in case they are useful to others, in order to try and repay as best I can, all the helpful posts by others more knowledgable than me.
I’m starting to think that if the Co stays on NAS thus there is a credible business, then holding the shares for another year or two may be the best course of action.
I’m thinking that maybe I can play the initial volatility to hopefully increase my shareholding, then hold for a year or two.
As long as the company is prepared to clean itself up.
It’s internal controls seem to be insufficient and it’s own audit committee compromised.
Surely Zheng Cheng (I have him holding around 14M shares) must have realized by now that the market just won’t allow his shares to be decently valued until the company convinces the market it is investible by being open and transparent.
It can only do this by having an independent forensic audit done. The value of his stock won’t go up until he does this.
It’s gonna be ugly for a while but he’s going to have to fess up to the financial self interest I think has been going on.
I‘ve divided up the DTT concerns into 3 areas to try and deduce the seriousness of the concerns. I’ve made some simple interpretations, which with my limited knowledge of these matters, are the best I can do:
Cash/Banking issues
issues related to the authenticity of bank statements
a loss of confidence in bank confirmation procedures carried out under circumstances which DTT believed to be suspicious
concerns over possible undisclosed bank accounts and bank loans
the verification of salary payments made in cash directly to employee bank accounts
They have probably been dicking around with the cash to either profit from ‘hypothecating’ or ripping some off or both
Operational issues
issues concerning the validity of certain advertising agents/customers
and bus operators (including with respect to certain of the Company's top ten customers
and the potential double counting of a certain number of buses
the verification of the production process for advertising programs
They have probably been inflating sales possibly to meet the make good target and maybe also allow the Lins to get out at an inflated stock price
Taxation issues
information on file with the State Administration of Industry and Commerce as to certain subsidiaries appearing to be inconsistent with comparable financial information provided to DTT
the verification of certain subsidiary tax payments with the local office of the State Administration of Taxation
the verification of the validity of a sampling of tax invoices issued in connection with certain large transactions
I thought SAIC is usually inconsistent, with GAAP and SAT at least, but I also think I remember Fernando saying Jacky told him SAIC would match this year?
The verification of SAT tax and ‘validity of a sampling tax invoices’ I take to mean they havn’t been able to verify (one way or the other) Are they saying they have received insufficient information, rather than suspicious information? They only use the word suspicious in no2 in cash/banking issues.
Again someone may have been ripping off some cash - ‘tax invoices issued in connection with certain large transactions’
DTT stated in its resignation letter that, in its view, the Company was not in good faith willing to proceed with the course of action requested by DTT
however, the Company believes that it was working to address these items at the time of DTT’s resignation.
It’s possible (but unlikely IMO) the company just needed more time to address the issues - in which case they would have asked for an extension to lodging the 10K and most probably Jacky and Dong (Starr) would not have resigned.
It seems to me that some underhand dealings are far more likely, whether they amount to fraud, I don’t know where to draw the line, not knowing the specific details.
I think they have been manipulating the cash and inflating sales.
I’m prepared to believe that management may just be benefiting from endemic deceptive China business practice attitudes that we westerners would find unacceptable. Also they seem to be able to do it with relative impunity – so why am I invested in this space at all!?
China is number 78 on the world corruption list. For the number 2 economy in the world I guess that’s pretty poor.
For myself coming from the least corrupt country I realize I have been naïve to trust China business in general.
I just did not think Starr and DTT in 2009 could be fooled and gave some credence to Chinese native speaker and apparently savvy Ping Lou.
http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
I believe there is a business and we’ll find out how big after a credible audit and should know by the time the stock resumes trading on NAS since compliance will surely demand one - I think? (all bets off if on pinks though)
If the company has only half the stated cash and only does half the stated business, then the CEO will not earn his make good shares, thus there will be no dilution in 2011/2012 and CEO may (and should) lose his 2009 1M make good shares.
If he wants to increase the value of his current very large share holding, then actually using the 30M buyback to buy say 5 -6M shares at $5 -6 average on recommencing will reduce the shares outstanding to 34M
The company cash would still be a healthy 70M
He would be buying back stock at 3PE, hard to get a better aquisition/investment/expansion deal than this.
He would ultimately be increasing the value of his own shareholding, thus should be incentivized to do the buyback at least.(assuming he still does have a large shareholding?)
At half the stated business, 2011 EPS should come in at $1.75.
Once the dust settles on both the company and this dodgy china space CCME could see a PE of 8 again in the next year or 2 = $16 in 2012 say, based on 15% YOY EPS growth and $2 EPS.
I say could not will!
Considering there will probably be an overreaction to the downside on recommencing, a possible $6 opening or less will be a price many longs might sell out. A possible approx. 200% return on holding for 1 year is hard to beat in any other investment out there i.e. from that level, this may be as good an investment as any, so why sell at $5-6?
By 2012 there will be a new generation of investors in CCME. Much of this current generation will have sold out on understandable disgust and disillusionment.
But if the company was to re-establish credibility ( I would expect it would take a forensic audit by E&Y or similar to do this), having gone through the hit piece/clean itself up cycle/ clean 2011 10K - I think that the new generation of stock holders here will be bullish about the stock again, especially if the China small cap space in general has been more cleaned up over time - more stringent audits by higher grade auditors plus possible legislative action by SEC - and the shallow FUD pieces have lost their effectiveness.
I don't see how this space is even investible at the moment but at least CCME may have seen the worst - may have.
IMHO FWIW.
I was hoping for a lesser list than DTT has come up with!
In light of all the short allegations about CCME and Deloitte watch it seems DTT took greater pains to check behind the company statements this year and what they found does not look very healthy.
It looks like the Lins in concert with CEO and Kang, at least, have been up to all sorts of deception.
If the CEO, and whomever else resisted a decent audit be done, had nothing to hide, they would have accepted DTT’s recommendations, since not to do so, predictably and inevitably got us to where we are now, with the prospect of a stock in free fall on recommencing.
Management ignoring DTT was untenable to both Jacky and Dong as they made clear in their resignation letters. The Starr action against the co now just verifies the dirty work that must have went down for me.
Since CEO etc. resisted DTT recommendations, why will they now agree to a forensic audit?
I guess if they want to stay listed in US they will have to clean up the books and business practise?
I had hoped that DTT had resigned under short pressure, too hot to handle, cover their ass etc. but really that was always an unrealistic hope.
DTT is much larger than shorts, they have no ulterior motive, they have just done their job, more stringently this year because of all the doubts as to veracity in this space.
Their trust in management’s statements in 2009 was as unfounded as was ours in 2010.
Dig deeper and you see the worst of China cunning, dishonesty and greed.
This now looks like maybe $2-3 at best stock, short term on recommencing and only more than that if they do try to clean themselves up through an independent audit process and adopt the consequent controls recommendations.
Looks unlikely though, since they seem to have been shown up as conniving, opportunistic crooks stealing our money one way or the other. I don’t see ethical and shareholder friendly behavior here, they will do what they were doing all along – whatever is best for their own self interest.
If that means being able to just walk away with no personal liability or consequence, they will do that I guess.
I didn’t say to count on it, I said consider it. It’s a possibility as is what you suggest.
The point of my post was that whilst such trading possibilities exist, due to the extreme short interest, the assumption that this will be an almost totally worthless investment is not necessarily valid.
I don’t see reason yet to believe the investment here will be almost a total loss. There is nothing to suggest that will be the case at this point for some of the reasons you pointed out.
I don’t think it’s necessarily as prudent to expect the worst as to try and anticipate the potential price action when the stock trades again.
With so much short interest competing with itself to cover anything is possible regardless of the ‘news’
Not knowing the specifics is not comfortable for anyone and I think almost everyone expects there will be some bad news.
I don’t see any indication yet that it will be really bad news however. We will know more later.
Based on what is known now, I see no reason to expect a total loss here but reason to expect a ‘significant’ loss, but even this could be mitigated with a sound trading strategy around the re opening.
There is a business. There’s no indication that this is an outright fraud, thus not an outright loss, though there may have been some fraud, the extent of which is unknown right now.
The worst negative for me is that the CEO could not agree with DTT CFO or Starr. That’s 3 opinions about the best, most prudent action to have taken, against 1.
The best positive, is the stock being halted and with huge short interest, which will want and needing to cover, since the ultimate end game is manifest with DTT resigning.
Whist longs may fall over themselves to get out on the open, shorts will also fall over themselves to cover at the best price and since they outnumber (disillusioned and tapped out) longs, shorts could be in a situation where they see their potential profits evaporating on a strongly spiking stock price – panic covering?
Consider you own the stock at 12 now, sell at open for 6, buy back a double position at 3 and the stock goes back to 6. Your portfolio value is the same as it is now halted at 12.
If the business is half of what it claims to be, it’ll be trading at a 4PE but one of the few RTO/SPAC’s you can be sure is clean/ has been cleaned up and in full compliance.
The outrageous hit pieces were intended to be so, to encourage longs towards the complacency to stay in the game or add even more as many did, selling puts etc.
Whilst all the while, the fund or few funds with inside information knew they had a smoking gun with DTT.
I don’t think the company is an outright fraud but Rick Pearson got it right saying the 10K had to be perfect.It’s obviously not.
My apologies to Rick, Ratobranco and all whom I felt critical.
I hope I have learnt to be more open and considered to all sides of the discussion and all possibilities from this.
Unfortunately the stock will be overly severely punished even if the problems prove to be relatively minor rather than outright fraud.
I seems unlikely to me that the company ’fooled’ DTT for so long, having no actual viable business, so the question becomes how much of a business is there? That will determine where the stock price ends up after the probable crazy volatility on restating/recommencing.
The binary news (CFO DTT gone) is out, thus short play is at it’s probable end point.
Stock will fall on open, but surely shorts will cover this time, stock should rise on that, maybe appreciably, especially if the problems are not major v’s intentional fraud.
I'm not giving up on it yet FWIW.
I posted previously. The longer this goes with no news b4 Wednesday, the better it looks for longs.
Whatever they needed to 'decide' should have been done long ago and PR'd.
They don't need to decide anything.
Funny, the longs have been wanting the Co to deliver a king hit to shorts, but won't believe it when it's happening.
Rather the're arguing the short case - restatement/ Deloittes resigning etc etc!!!
As Joe says....
If I wasn't long I'd almost have to say the shorts deserve to win, they face the potential of unlimited loss but it's them that keep the faith.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=60907196
I’ve come around to believing this halt is a company tactic.
I think it is just too great an unlikely coincidence that Deloitte’s would find problems with the audit at such a late stage or be in conflict with management about it.
I’ve also changed my mind about a potential stake/buy out offer, as this is also too great a coincidence to have happened at this particular time.
On the balance of probabilities I think a halt at this late stage is indeed a tactic to hit the shorts.
Whilst management may or may not see this as something personal against shorts, they do have a self interest and responsibility to defend the company and it’s stock against what have been wholely unreasonable attacks.
The halt has come at a time when the DTT audit if not finished, will be largely known.
Then there is Starr.
I think Hank Greenberg and his staff have as much savvy in the US capital markets as anyone.
Greenberg has a long history in China with much respect garnered.
In addition he has his rep on the CCME board.
Because of this and also because of the Starr large stake in the company, Starr will have management’s ear and with a now quite long working relationship - CCME specifically having stated they wanted Starr’s expertise via the original offering – I believe management would follow Starr advice first.
If I was Starr I’d be angry about my investment being dicked around like it has. But Starr have the expertise and clout to strike back and have their investment more fairly valued.
I believe the halt is on Starr advice.
If this is the case, I believe they have manufactured whatever sufficient tenuous reason to justify a ‘material news’ halt approval.
I think there will indeed be a slew of good news accompanying the 10K release.
This was always going to be the best time to defend the stock, as the 10K is the binary clincher.
If the 10K is clean, as I believe it will be, shorts are trapped, the stock will gap up.
Longs know this and there will be intense buying pressure from momentum longs competing with the shorts need to cover.
Basically they won’t be able to cover fast enough to get out without ever increasing losses.
Judging by the latest slew of hit pieces the shorts had planned to get out lower by intensifying the FUD around the 10K release. Judging by the fear on this board today,that tactic would have been successful but has been stymied by the halt.
They will attack the credibility of Deloitte’s and the audit – need a forensic audit etc. etc. - after the 10K is out.
There doesn't seem to be much middle ground here.
Either the Company is an incredibly cunning fraud, or at least managed to fool DTT on last year’s 10K with a certain indefinable level of deception that was not detected by the No1 auditor in the world OR they are what DDT has found them to be in 2009 and likely 2010, since DDT are still on board a few days before 10K release.
We will hear nothing from the company until the 10K is released on time or earlier than 16th – it won’t be late this time - and followed up by a number of positive PR’s.
If the shorts are seen to have got this one so badly wrong, that in itself will give the company added credibility on top of the clean 10K itself.
In addition longs will now gain from the much greater visibility the company has garnered from this whole saga.
The outcome here will be big news and the stock seen on a scale possibly similar to the profile it might have had on a big institution initiating coverage.
Ironically, we’ll have the shorts to thank for that.
Is the company a very clever fraud? If so, it has fooled a lot of smart people including the world’s no1 auditor.
If the company is not a fraud you will be rewarded for having the patience to hold the stock i.e. you cannot lose.
DTT signed off on the 2009 10K.
I don’t think DTT are feeling much stress from the short attack on CCME. We tend to transfer our own huge collective concern onto the actors.
They will just want be extra cautious and steady with this audit, since aspersions have been cast.
Like CCME, DTT will certainly stand by their work and not answer to anonymous bloggers.
DTT is bigger and far more credible in the financial markets than any hedge fund/s behind the short bloggers. They will be sure to be accurate but will not be defending themselves or feeling the need to cover their ass in any way.
DDT is only answerable to the auditing standards expected of them and over and above these by choice/agreement with CCME.
It is now so late in the piece that a DTT resignation over something unexpectedly revealed must be extremely unlikely. If they havn’t already finished the audit any delay now should be over minor issues.
Nor will there be any second forensic audit, since the company has engaged the world no1 to do this audit, who are not answerable to unsubstantiated allegations.
Shorts have been inadequate in proving fraud. They have made the claims, proof is incumbent on them.
The company has shown that rather than give credence to bloggers, they will stand by their operating performance.
I think the company’s silence during this last period of short blogging attacks, speaks more to their refusal to be defensive by attempting to justify themselves to baseless accusations than anything else.
Many longs assume if the company had been far more reactive with PR’s then the stock price would have performed better.
That is not necessarily the case, they may just have added fuel to the fire in a shit fight and end up being seen as ‘protesting too much’.
Moreover the short bloggers vacuous claims invite them to stoop to the level of the ridiculous.
As for this halt, needing an extension with the 10K doesn’t justify a halt. They would file an NT with an unaudited pre announce of NI as they have done a number of times already. This has always led to a stock price rise on favorable earnings growth news, not a fall on the delay news.
If something negative has come up with the 10K at almost the last moment, that would be very unlucky timing so late in the piece and makes this unlikely IMO.
Yet ‘something’ wrong with the audit is almost the only possible negative that could be at this time, unless something totally unexpected has happened, which OK, is always a possibility in business – again an unlucky coincidence in timing.
Yet since management and more likely the board, needs to decide something, we wait until they can all come together and decide it.
Anything less would have seen a filing or PR of some sort out on Friday, rather than a halt (even if such PR was worded by their legal counsel - if they actually are in between IR firms, which I doubt is the case at this very important period of communication for them)
I don’t think a PR saying we are halting the stock for the board to meet and discuss’ something’ is very helpful. They hardly have a history of releasing puff piece PR’s, rather they have always released specifics not spin. They will PR on the actual news of their decision.
I don’t think anything the company itself has planned in the way of a new initiative (except maybe a potential acquisition or something they feel they need to act fast on) would be so urgent that they must halt the stock, thus the business proposition must more likely be to CCME from another party.
If they are considering a potential stake/new ownership structure – possibly hostile?/takeover offer, then a halt to prevent any potential leak or insider advantage is not only prudent but required for something so material to be decided.
Long interests are preserved by the halt, assuming the board is indeed meeting to discuss something potentially advantageous. If so, then it’s shorts that face a potential gap up on the news.
In my ignorance, I’m guessing an offer of some sort, likely to be low ball by longs expectations (and management and boards also IMO) However a 25% gap up on a floor price low ball initial offer of $15 would be a good start to a trading resumption.
However, I ultimately don’t think CCME will accept any offers from anyone because there are too many potential exciting growth opportunities that make the untapped potential far more enticing and interesting than giving an interest away now, even at 2, 3 or more X current SP as far as management is concerned.
The company is virtually first mover with a moat in a still quite nascent advertising market , so there is no telling how high they can go, that’s gotta excite management and not just for the money.
The PE’s of some great businesses are now so low that it must be inevitable that offers of all kinds will occur. It’s patently obvious that these companies will fetch much higher multiples on domestic China exchanges and the US also once the FUD stops and enthusiasm returns. Buyers need to be sure of the veracity of their target, clean 10K’s from top flight auditors crucial.
Who knows, since FMCN also has the benefit of Deloitte’s services, perhaps they got first whisper on a solid CCME 10K is, on that basis, certainly a better potential stake for them than VISN was.
FWIW
However it's not going to stop. They will keep banging away introducing more anti Auditor unfounded FUD and weak longs will cave in on this also eventually.
May be helpful to consider what the next short angle will be once we are all slapping ourselves on the back after the next big run up.
I think the new short tactic will be to attack the auditors where 10K's are solid.
“The only function of economic forecasting is to make astrology look respectable." John Kenneth Galbraith
"Stop trying to predict the direction of the stock market, the economy, interest rates, or elections. We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children." Warren Buffet
Selling naked calls seems truly stupid.
The downside for shorts is potentially unlimited. Longs selling puts at least only have $10 downside if the stock goes to $3.
The company already has a clean 2009 Deloittes audited 10K. So why will 2010 be any less clean, especially this late in the peice?
However I don't think selling calls is the sort of activity a retail short would engage in.
Thus if it is large hedge funds you really do have to wonder
'what they have'.
I ownned DNDN, through a totally inexplicable and virtually unprecedented rejection by the FDA - of an expert committee recommendation for approval - only to later find out the full extent of the short plot malfeasance.
I wonder if there is some underhand plan here to trip up CCME even after a clean 10K.
I'm holding long through the 10K but wary that CCME may be a much longer hold than expected just as DNDN became, before it got it's just recognition.
With DNDN organised large shorts had no compunction denying dying men a life extending drug,which ultimately caused many unnecesary premature deaths. Sick. Call it Carson Block greed.
Don't sell naked puts unless you have the cash to buy the potential stock assignment.
I doubt MW will be going long on any stock anytime soon. There is an ulterior motive in most of what Block says.
Carson Block is an inept, failed investor who found an easier way to make money. What’s despicable apart from the damage done to the stockholders of good businesses in itself, is the unethical, dishonest and opportunistic modus operandi MW is premised on.
If he really did 3 months (or was it just a very long phone call) on the ground investigation of CCME, discovering a big fraud, then he should have found a lot more ‘evidence’ against CCME than presented.
He says ‘we do 3 months investigation' but in actual fact he has come up with no indisputable evidence of anything, but has come up with so flimsy ‘reports’ on CCME, that the rest of his ‘3 months research’ could only have shown him clearly that the company is actually very solid.
He knew full well this business is no fraud, when he produced his ‘research report’
He is backing off now via this latest statement re the audit confirming CCME validity or not, just to be able to distance himself from the fact of a crude, dishonest, misleading ‘hit piece’ that caused longs to lose a lot of money.
He wants to reduce the risk of legal redress and placate the anger and antagonism against himself and his family.
I know he has received a lot of hate mail including death threats because he has told me this in email correspondence, including certain excerpts. Disingenuously angling for some small empathy as he is now trying to do publically.
The reason he responded to my email is that I also sent it to his wife, politely pointing out that the reason for her family’s new found good fortune was at the expense of my own and many other families.
I asked,was she aware that her husband’s unethical and immoral, if not illegal activities, in making all that new found money, was being investigated?
I assume he may have told his wife about some new found good fortune, how much money they have made, whilst omitting the sordid fact that it has come from piggy backing off the hedge funds that pimp him to strip genuine investors of their money.
I assume he hasn’t told her the full story.
Hasn’t told her the truth he knows to be true, since the release of his CCME’ research’reveals him as a manipulator a liar and possibly a fraud unless greed has made him able to lie to himself.
If I was him, I would be feeling very concerned about personal and family safety. He deserves it, he has made a lot of people unjustly poorer and consequently very angry. Consequences that may come back to hurt himself.
It’s one thing to successfully go short, calling a genuine fraud based on DD and thus justifiably profit but entirely different to deliberately smear a company your DD has shown to be clean.
This latest statement about going long in future, may well be to placate the anger of ripped off longs by intimating he may come across to ‘our side’.
Never forget what this man’s lack of integrity has done.
Even if/when the stock price recovers, we will never know what the stock would have attained without the Carson Block ‘hit piece’ scam against it.
There has been a great opportunity cost to me in owning this stock for the last year to watch the share price essentially go nowhere, while the business story and EPS growth have soared.
MW is not a research house, MW is Carson Block. Carson Block is a tool for certain hedge funds.
Blocks ‘clients’ make money going short and FUD fleecing weak longs .
He certainly won’t be going long with YONG or whatever is next.
Like Bird, he portrays himself to the shallow media as a crusader against fraud, the added ‘credibility’ giving him more power to do it all again somewhere else.
Being the servant for his clients, he will be getting more heads up leads from these same (much better connected than Block) hedgies on other shortable stocks.
Some, like ONP and CCME, will be solid companies but vulnerable because of the stock holding dynamic that makes a FUD attack workable, others like RINO with some inherent serious concerns.
Thus MW is not going to be discredited and go away, he will get enough genuinely questionable RINO red flags, mixed in with others not so - companies where he just makes some ‘honest mistakes’ such as Bird like ‘Credit Bureau errors’ and ‘misleading phone calls’ - such that the intermittently reinforced, somewhat justified in some cases, FUD will make his every hit piece effective, until maybe, the passive media start questioning his own ‘business model’ or maybe even the SEC do something about it. Yeah right.
http://www.carsonandkathy.com/contactus.htm
They are taking advice from legal counsel. Legal counsel being conservative and with no skin in the game, thus more objective than we are, are going to say.
Look, refute the substance of the allegations, point out the timing and short self interest in the attack then let your business speak for itself in the 10K.
A whole lot of shallow PR’s will just make you look defensive.
This concerns me:
‘But the U.S. Public Company Accounting Oversight Board doesn't appear to be ensuring that auditors are verifying these payments. That is a major problem that hasn't even come to light yet’
Is this going to be a short FUD tactic used to attempt discrediting all Audits and Auditors?
‘but I am also looking to expand my understanding of other emerging markets, including Latin America’
A euphemism for I am going to take my ‘hit piece model’ to new unsuspecting markets
To me,it looks more like he's trying to get them off the hook (Muddying the Waters so to speak) through raising this suggestion that the deliberate MW fraud/misinformation tactic was really just the result poor MW themselves being taken. Shifting the scam blame onto outsiders.
I’ve stopped reading most posts on this board as it’s got a lot more shallow lately.
There has been nothing to suggest the company is not performing as expected. The short attack came and had virtually zero substance and thoroughly refuted. There is nothing more to know about this company until actual news happens. More important there has been no bad news vis a vis Deloitte.
People spout Buffet – know what you own, future is China invest accordingly, buy well managed growth with a moat etc. etc. but in the end all is forgotten in the face of herd emotion. The stock price is down from $23 on FUD.
Management should do this do that to make us all rich ASAP?!!
Management should continue to execute as it has been.
Management is not responsible for US stock market irrationality.
Management does not need to be ‘loyal’ to this or any future generation of nameless faceless retail shareholders. Though to our good fortune they actually seem willing.
Management is responsible for the growth of the company, not trying to bail out shareholders from their own irrationality.
Joe got it right – CCME longs are piss weak and have nothing like the balls shorts have.
The longs are the problem with CCME not shorts. Weak longs who sell out.
How, when, where, what will shorts do next!!! - wouldn’t matter if longs had the ticker to believe in their own judgment as to why they invested and what they owned and had enough patience to see further than today’s stock price.
Marty,you said it all. Not only is the market not efficient but people are stupid.
In closing everyone should remember that this company wasn't suspect of fraud until the two reports came out. Muddy Waters in particular claimed that the 2009 revenue of $95m couldn't have been more than $17m. Their rationale? "We estimate that CCME generated 2009 revenue no greater than $17 million. We base this estimate on the metric of revenue per employee in sales and marketing" and "CCME’s 10-K suggests that it has only seven sales people."
I suggest readers look at the 2009 10K since Tracy didn't appear to. The company makes two disclosures on Page 15: " For the year ended December 31, 2009, CME derived 78.6% of its revenue from selling advertising time slots to advertising agencies" and "As of December 31, 2009, CME employed an advertising sales force of 65 employees." Hard to use a metric of revenue per employee to justify fraud when almost 80% of the sales effort is outsourced and your starting point of employees is off by a factor of 10x. So this is what started the discussions about fraud. Now everyone appears to be backing off the original outrageous claims while trying to argue that a less significant degree of fraud could exist. Sure that's possible but again remember that the conversation only started because of outrageous claims that most are now distancing themselves from.
Fernando I don't know if this has been discussed already.
I find it surprising that Shapiro suddenly appeared, not with the more usual class action against co but to support current shareholders and virtually simultaneous to the time that management was consulting with their lawyers after the MW hit.
Do you know anything or think it likely that CCME have got Shapiro in to defend against the shorts on the quiet?
It seems to me you can’t argue with the long position based on fact i.e. do your DD and the stock checks out as a potential monster.
Then again you can’t argue with the short position based on the volatility of the stock – make weak hands fold after a run up - rinse, repeat.
I will never again listen the long thesis that shorts are stupid -excepting retail shorts(as stupid as weak longs)
There is at least one large short position in this stock that knows exactly what it is doing and won’t leave it alone until the volatility in the stock price settles. Doesn’t seem to have enough strong holders yet.
Been hearing about the MOASS coming for a long time now, I don’t think anyone knows or understands how/why/if this will happen.
Long assumption is shorts must be wrong. It’s an assumption I hold, but it's an assumption.
Value/Timothy, thank you so much for your continual efforts to promote awarness of this great company. Great add to that Forbes article, extensive, pertenant and very well written as usual. Much appreciated.
Actually , I usually post under the handle RJP and not very often either. I’m very long CCME and my post was to register my frustration at what just happened- again - to CHBT.
You can put your head in the sand and hope the same doesn’t happen to CCME. I hope it doesn’t happen also, since I will hold. But the point I was making is, that it could and that weak longs will cave and might cause the same result for CCME as for CHBT today.
What’s so disappointing is that all the reasons that CCME is so good a long term investment get totally ignored in this CGS space as soon as one these shallow hit pieces come out and weak longs head for the exits like scared sheep, not based on the substance presented in the smear piece, but because of this pattern that has developed of others holding other stocks dumping on a negative SA article by some unknown - thus the expectation becomes self fulfilling.
One day this pattern will stop but not anytime soon by the look of CHBT today.
CHBT to CCME
New angle - get someone in China to write a slur piece, in a foreign language, mangled and confusing in translation, partly referencing Citron, introduce a new lie - tax irregularities - to make it sound like someone on the ground in China has some inside knowledge.
This is bad news for CCME. That these attacks can be so simply and reliably mounted. One only needs a remotely plausible sounding article. Just enough to get the self fulfilling herd reaction momentum started. Or maybe just buy a few thousand puts is enough?
There has mostly been very little to zero substance to these hit pieces but the FUD easily manipulates weak longs into caving. CCME has a history of weak longs caving in. Knowing what you own doesn’t mean much to your net worth when the majority is heading for the exits.
After shorts took a bath after the last Regsho why won’t they mount an attack to avoid that happening again here?
It doesn’t really matter that CCME is in actual fact pretty much unimpeachable, strong longs are minority holders it seems and at this stage, there is nothing to show institutions hold significantly larger positions or the shares are in stronger hands yet.
CHBT down 19% in a day.
CVVT now just 30c above it’s smear piece day close, despite a strong and immediate PR and conference call.
FUD works. Why won’t the same happen to CCME? Down big on a smear piece then painfully slow to recover.Substance and quality of the FUD doesn't seem to matter as much as the tone and language! Any manufactured doubt will do.
Then rinse repeat by the shorts?
Sean Wright obviously got it wrong in his SA CEU article yesterday, suggesting the time to buy is after the smear has happened. Any future variation on the same lie will panic longs in the same stock again.
Weak longs are the problem, not opportunist shorts. We no longer have patience or conviction or believe we know what we own.
What a stupid game we are trying to play in this space, expecting a margin of safety in undervaluation, when in fact fundamentals hardly matter anymore.
Angry!
Crane stated they want to concentrate on Guijiao and not appropriate for them to be looking for aquisitions anytime soon (or words to that effect) but they have those 40000 ton tar tanks they can utilise at low cost if they need more capacity at Guijiao.
He also said "there are plenty of opportunities for other facilities furthur down the road but no plans in the short term"
They only cover central Shanxi now, they have a lot of potential expansion opportunities in Shanxi without even looking to other provinces.
I did a rough cash accumulation estimate using their net income estimates and estimated warrant conversion dates. Bearing in mind it cost 30M for 70000ton facility in Guijiao including inventory they may soon be able to fund from their own cash.
Rough cash $M Running Total
at Q3 fiscal 10 22
Q4 32
+ warrants 3M 35 net inc. warrants
Q1 fiscal 2011 53 15 3
Q2 74 17 4
Q3 97 19 4
Q4 123 22 4
Thanks for the quick answer :)
Hi Fernando, roughly how much cash do they have now?
I get 6m at Q4 09 plus say 9M from Q1 10 and 25M after expenses for the last capital raise = around 40M.
Does that sound about right to you or have I got it wrong?
How likely do you think they are to want to raise more cash i.e. sell shares/warrants in 2010?
Would appreciate your response.