Leaving - Right, but if I own a profitable chinese business that listed here via RM, and the business doesn't need money, what incentive do I have to stick around, especially with all this chaos? I can take the entire company right now all for myself. The reverse merger structure does not even represent a true legal claim on the Chinese business, so there is no legal obstacle to leaving. Just walk away. ENHD did. Simple as that. Asta la vista sucker.
Ignore the lawsuits and everything. Many CGS scams have successfully left this way, and many more will leave going forward IMO. Unless you need money, or you want to be moral Mother Theresa (which these chinese scumbags definitely aren't interested in being), there is no reason to stick around.
That's why I keep coming back to the point about selfish incentives. When an owner sells you something, you need to know beforehand how he benefits from the sale. How is his bottom line improved by this transaction? If you don't iron that out beforehand, you will find out after it's too late, and the joke will be on you.
If someone offered to sell a 10,000 mile mercedes for $500, many value investors would probably jump with joy, rushing to buy it. But why should anyone buy it? Unless you think the seller is a total retard, the deal is definitely not going to be in your interest. Something is definitely going to pop up after you make the purchase, and then you'll understand why he sold it to you for that price. Of course, by then, he'll be long gone.
If the mercedes was clean, and worked properly, and so on, he wouldn't sell it to you, he would keep it for himself. Simple as that.
Likewise for CCME. If the company really were generating $80MM in cash flow per year, they never would have sold a 25% stake to clueless, naive American SPAC-searchers for $40MM. That's 2 times earnings for God's sake.
Everybody seems eager to believe in a free lunch, that you can get something for nothing. But that's not how things work. A value investor should only buy what the *market* makes cheap, b/c the market is irrational. Owners of companies are not irrational, and if they are willing to sell you stakes in their companies for peanuts, then something is definitely wrong.
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