Replies to post #4140 on SEC Charges Eleven in Stock Manipulation Ring

[jurisper]

It'll be interesting to see what ADVFN does & the effect all this has on them.

In one way it's not very material. IHUB was only about GBP 520K of their rev in financial 2008, out of a total around GBP 7M. (IHUB made a loss of about GBP 250K.)

In any normal business you'd expect ADVFN to be doing the whole damage control thing: internal investigations; suspending everybody; ring-fencing off any IHUB-related taint from their other properties; maybe freezing all activity on IHUB until the situation is clearer; looking at suing the IHUB principals for breach of warranty on the 2006 deal; etc etc etc.

But I don't know if ADVFN actually needs to do all that. Do punters on penny stock message boards actually care about the credibility of board management? Would anything revealed last Thursday actually cause subs and page views to drop?

Apart from the credibility issue: assuming that ADVFN itself isn't filthy, any hypothetical damages or fines against IHUB presumably don't breach the veil to hurt ADVFN. IHUB is less than 10% of ADVFN's revenue, and around a quarter of its loss (financial 2008 numbers), so I don't see how it would hurt their financials much just to let IHUB die if any damages, fines etc were awarded against it.

A bigger concern might be litigation from people who bought shares back in 2006 in the placement to raise money to buy IHUB. Something along the lines of breach of fiduciary duty by ADVFN in performing sloppy diligence. But that seems pretty thin - where's the actual damage to those shareholders etc.

So I think maybe it all comes back to how much they care about credibility - it'll be interesting to see.

IMO, if they do care about it, they may let IHUB die or sell it back to Bob Z for a few bucks or whatever. It's loses them money, it might be expensive to do a real clean up, there is some risk of new liability if filthy things happen at IHUB from now on, by ditching it quickly they cut off the infected organ etc etc.

They abandoned Japan a little while ago; I think they could abandon the US and retreat back to the UK without damaging their top line much, while at the same time perhaps turning themselves EBITDA profitable faster. Maybe their shareholders would actually like that, if it was done in the context of a plan to tidy the thing up for a sale in 12 months or whatever.