FHM: Let me clarify. Odds are, if I had to bet-- *caveat* and if I had nothing better to bet on during a huge down market-- the report from DLA Piper / PWC will show CCME has a lot of cash on hand as well as a going business which makes money, even if there have been a lot of problems. Odds are they will find some serious concerns too, i.e. where did the money go; did the company exaggerate its figures, earnings, bus counts, screen counts, etc. Sometimes one or two instance of fraud or self-dealing is enough to slam a company's shares, even when the rest of the company is fine.
Silver lining: If CCME is mostly legit and then pays a real, regular, substantial dividend and buys back shares, then the company could recover. But with the shalacking this poster child of China, of RTO's, of China RTO's, and of shorts has taken, it could well take many years of transparent performance to come back in favor. The company really needs Cheng Zheng to step aside and let a non-controversial pro run them.
Reminds me of the Vonage IPO, even though Vonage was just a bad IPO poster child, not an alleged fraud-per se. Still, it took many years to get anywhere close to anyone's good graces for Vonage, it's customers who were offered shares sued, Vonage had major rulings against them for blatant patent violations (the companies who won these patent suits are a who's who of communications companies (Verizon tops the list), and they only relatively recently have begun to gain upward traction, in part because of extraneous issues like interest in Skype. Vonage is a half decent example because its founder faced some securities violation accusations from his activities at Datek years before.
Here are some basic responses to yours. My reply thoughts are in red.
//Bottom line, why no new Director on the Audit Committee? Why let the stock get unhalted for an easily corrected technicality?// - Perhaps because no one in his or her right mind would commit to serve in that capacity absent a completed forensic audit. That seems pretty sensible to me. -- Seems to me that CCME claims to have big cash, meaning enough to compensate someone for taking the risk; coming on after the possible fraud is a defense for actions that happened beforehand; the company could have signed a nondisclosure agreement and shown the possible Director candidate preliminary results or findings from PWC, from DLAP, through its' attorneys, and through its professional advisors to get them to feel more comfortable. There's plenty of qualified people who could have stepped in if CCME diligently searched and intended to hire the Director candidate.
//If you can disprove the "key" allegations, why not fight in the hearing to protect shareholders?// Not sure precisely what you are saying here, Andrew, but the company did announce its intent to appeal the delisting, complete the forensic audit, and THEN share its results. -- FHM, it's plain that if the company can disprove the allegations, they should have fought zealously to keep the stock halted (which means not rolling over by failing to get a new Director in place (something I consider much easier to accomplish than you do. We can respectfully disagree on how easy it is for a company with 170MM in the bank (allegedly), #1 on the Forbes 200 up and coming China companies list to accomplish. The could have asked any number of business people, lawyers, and passed whatever was needed to pay up. Even if just to meet procedural expectations, the new Director could even leave and be replaced after a short stay that's long enough to get through the Nasdaq Hearing while the shares remain halted.
//That suggests the CEO was with the shorts, and that fiduciary duty mean nothing to this CEO.//
huh? Now you've completely lost me... care to explain? Thanks. - FHM, I am not saying the CEO was definitively in bed with the shorts. What I am saying is that if A) getting a new Audit Committee Member / Director could have been installed; and B) the failure to perform A means the shares necessarily will open pink (giving shorts a massive windfall despite a huge remaining information vacuum that would have included exonerating evidence if only CCME had remained halted), then C) the CEO / Board Chairman did not honor his fiduciary obligation to zealously protect the company and its shareholders since the shares would likely have reopened higher (whether listed or delisted) than they did upon delisting based solely on technicality A with a massive imbalance of alarming information in the public domain from within CCME. I am excluding all hitpieces from this analysis.
BTW, we don't even know for sure what Dorothy Dong proposed would be reasonable measures to protect shareholder value that were rejected by the CEO.
And about the intent to appeal... that's nice, but they can change their mind on that, and it's too little too late for the shareholders, yet right on schedule for the shorts. On top of that, that's not binding; the company can change their mind or just go through some motions without really meaning to succeed.
Well, anyway, even if the CEO was in the pocket of some shorts, that chapter could be over and now the CEO may work to raise up the share values.
-Andrew
