Hey guys, as you know RatoBranco pulled his article on CCME and the shortsellers from the S.Alpha instablog when it did not get published by the S.A. editors as a "Contributor" article to the main forum; he's hoping to get it into another venue, more widely read than an S.A. Instablog.
When he pulled the article, all comments on it vanished, but i had already saved everything to my huge MSWORD file on CCME and other china stocks.
That CCME-basher Seasaw64 in typical fashion issued a bunch of derogatory posts in the Comment thread. Most of his dozens of posts bashing CCME over the last few months essentially come down to this (my paraphrase): "You cannot sufficiently prove to me that CCME is not a fraud. Therefore it is likely a fraud and therefore too risky an investment. That's why I'm short CCME."
Yet in one of his posts, Seasaw actually aired (ignorant) criticisms of CCME's business model, and in this he essentially aired the shortsellers' quintessential talking points on why CCME will not be a decent investment.
Here is his post... and i welcome folks to address the concerns he raises, most of them ridiculous. But this is evidently the best thing that the shorts can come up with! I offer it up as "Exhibit A" on how the shorts don't really have a valid case. Be aware that some of what Seasaw writes is already listed as "risks" by the co. itself and also listed by Global Hunter in their research note on CCME.
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Posted by Seasaw64 (written around Sep. 21, 2010):
Lets start with CCME's business. All that they do is place a television on a bus, with a hard drive, and play prerecored content. That is it. [YES, AND ADVERTISERS LOVE IT!]
They don't own the buses, so they are at the mercy of the bus drivers [???] to allow them to put their television on the buses. Of course, as CCME contends that the passengers like the entertainment on the televisions, it appears that CCME is really doing a service for the buses. Why is CCME paying the buses to allow them to install the television, as opposed to charging them for it? i don't know, but it is a bad decision. [???] It is also a bad decision to agree to contracts calling for mandatory increases in fees to the buses from 10% to 30% a year, all for a service that CCME is providing to the buses.
CCME also doesn't provide any live television, doesn't produce any of the entertainment content and doesn't own any television network. [So what???] In other words, CCME is at the mercy of content producers to obtain content. CCME claims that it gets free content from two stations and in return the stations get exposure. Again, that makes no sense and obviously, the content must be either free, be very poor, or there is another explanation that is not good for CCME. [???]
CCME also claims to sell almost all the advertising time to advertising agencies, a middle man that takes their cut. CCME claims the advertising agencies purchase the time in advance, another hard to swallow claim. [????] Consequently, CCME is at the mercy of the advertising agencies, who have a plethora of advertising outlets to choose from.
[In sum:] So, it is fairly obvious from an analysis of the economics of the business that is is not a good business that cannot generate the kind of money that CCME is claiming. [????]
Another problem is that, while I can find plenty of independent references to competitors of CCME, I cannot find a single independent reference to CCME's operating entity that is not generated from CCME itself. [????]
It is actually very unusual for a company to claim that its competitors numbers cannot be real. VisionChinaMedia has good reason to claim that CCME's numbers are not real. If you have read and studied a lot of businesses, it is easy to see that CCME's numbers can't be real. [???]
A press release by China Yida, who claims to have entered into an agreement with CCME's subsidiary, describes the business of CCME's operating entity very differently than it describes itself. that press release showed hte operating entity having over 200 busese in 2008, as opposed to CCME's representation that it had 15,600 buses by the end of December 2008. [CCME shareholders Millstone and Magma countered Seasaw on this point.]
In my opinion, it would be very easy for CCME to prove that they were not a fraud by providing and filing contracts with their largest customers and providing the contact information of those customers, so that the agreements could be confirmed. If the company would not do that, I am sure they could think of other ways. I certainly can and they have not done any of them, despite being asked to by a number of people, including myself.
AI
