On one hand, I can say that there is an underlining viable business. I have ridden some of the buses and seen the ad played. Here I differ from shorts and bashers such as Citron and Muddy Water.
I do not think the CEO is going to throw his work of the past 8 years under the bus all of sudden. Before it is over, he will put up a good fight. Only wish he has got good advisors.
If you look for signs that whether he is serious about defending shareholders value, wait to see whether a new auditing firm is hired.
To explain what just happened, I think there is some animosity between the company and Starr. Remember DTT is brought in by Starr. It is DTT's job to find bones in the eggs , to use a Chinese saying, because much is at stake: earn-out shaers, Starr's put option, and founders' penalty payment.
In the end, the two sides will come to terms and they will present a unified front and things will move on.
All that will happen while a forensic auditing is going on.
I do not think Jacky Lam had been a real CFO. At the best, he has been a glorified IR person and may not have the real power. Remember, he was not appointed by Starr, but rather, brought in by the original SPAC who sold the CCME shell. He has been ineffective to begin with, and his resignation probably does not make matters much worse as far as whether the company can do an audit without him.
I remember Jacky Lam stammered over the Capex number during the conference all. Any reasonably effective CFO would memorize the number right away. CCME has an extremely simple business model and does not use a lot of Capex.
I am troubled by Dorothy's resignation more. If she works for Starr and ideally her action is certified by her true boss. But she may acted on her own judgement and broke rank with the Starr management. If not, you can be sure that there is no much love left between Starr and the management. In a sense, it explains the DTT resignation as well. So DTT quit, so did Dorothy. The root cause is probably the relationship between Starr and the management at the time.
Cash has definitely been compromised, one way or another, with or without DTT checking. You give a Chinese management close to $200 million in cash and the company does not need that kind of cash in near future, you are giving a kid a bag of candy and expect he/she to not touch it. The management may think it is a discretion within the management's power. Starr and its representative (Dorothy) may not think it is funny. Part of that is cultural, part of that is personal. People need to learn to get along.
All in all, I am preparing for the worst. As the power seems to be with the management, I am hoping that the management can make the right decision at this point, not just for us longs, but also for themselves.
- Eric.
