CCME - Just to share my take, I'm out of the name, got out of the options at a small loss.
I sense downward momentum, I think we go lower as the Shorts make their next move, and I am not as comfortable in the name as I used to be. I can't say it's a fraud, but I can't say that it isn't either. This company is a mystery to me.
After some weekend research, I have renewed concerns about the initial SPAC valuation, it appears to me that it was even worse than I had concluded in my discussion on here with Fernando. I estimate that when all is said and done, they got less than 5.00 per share from the SPAC IPO (including the warrants). They had no need for it, no use for it, yet they gave away 25% of the company for an absolutely atrocious price--like 3 times earnings. Some would say they wanted to go public, that's why they did it. But what company with these metrics has to accept those terms? And what company would accept them without a capital need? I don't buy it. At a minimu, the management and I do not share the same philosophy when it comes to how to maximize value.
I feel like what we have here is a "I want to sell you a $1000 mercedes problem." I don't want to buy if you're selling it for that price.
Moreover, it doesn't really make sense for us to ask them to buy back shares from us at 10.00, when they sold the initial shares to us for so much less. As researcher aptly said, it is no surprise that they did not buy back in September at the lows, and don't seem to want to aggressively talk about buybacks now. Taht would be a terrible trade from their perspective.
Also, I was unimpressed with key parts of the response. I specifically did not like the response to the argument on p. 14 of the MW piece, the Coke argument. MW claimed that media buyers for Coca-Cola that would be expected to know of CCME given that CCME claims Coca-Cola to be its #2 customer do not in fact know of CCME.
There is a simple way to respond to this claim. If MW failed to interview the specific media buyer through which you advertise for Coke, then say that, and tell us who the media buyer through which you advertise for Coke is. Not that difficult.
Notice that they told us who the middle man is that coordinates with Apple distributors on Switow. That middle man is Eading Group. They had no problem telling us that in a very quick response.
Why didn't they tell us who the media buyer is through which they work with Coke?
More troubling is the fact that they tried to sneak past this point. Go to p.6 of the CCME response where they attempt to address the argument that "our competitors and certain media buyers do not know CCME". Notice that in this construction they have grouped the "your competitors don't know you" argument with the "important media buyers for customers you claim to work with don't know you" argument. But in the "fact" section they only respond to the "your competitors don't know you" argument.
They use the same canned "we are inter-city, they are intra-city." I don't find that persuasive, and I find the evasion concerning.
Where is the response to the "important media buyers for customers you claim to work with don't know you" argument? That is the #1 most important MW argument IMO, and it should be easy to respond to. Just state how you have a relationship with Coke. Or Lenovo.
Finally, I spent some time thinking about the "cash" argument, and I now see some semi-realistic ways that the cash could be faked. Recall that Zheng Cheng got a $31MM payday from the SPAC. Most of the SPAC money actually went to him in the IPO, rather than to the company. The question is, can he use that money to fake the cash balance for Deloitte?
The only thing that has been formally audited so far is $57MM of cash as of end of year 2009. The task then would be to turn $30MM in cash, plus whatever the company already had, into $57MM. It's not easy, but it's not the impossibility that I previously thought it would be. I've heard that there have been documented cases where individuals take out short term loans to fill accounts for auditors to check. In this case, the method is simple. Use the $30MM plus whatever you already had to borrow the difference so that you have $57MM. Take that money, give it to your closest partners, i.e., Shanghai Apolo (sketchy), have them put it in the "CCME" account. Done.
I'm not saying that's what happened, I think it is very unlikely, but it is not as extremely impossibly absurdly unlikely as I had previously thought. I understand also that 1Q and 2Q cash was audited, but we haven't heard that from Deloitte. When we do, at the 10-K, I think it will bolster the case. But there is also risk of "holdups", and I don't want to take them right now.
The recent Chimin Sang revelation that SAT doesn't match either (may be a lie, but may also be true) only makes me more cautious.
I am saying this just to share an opinion. I have no agenda, I sincerely hope that everyone here does well in this name. For me personally, I am not sure either way as to what is true, what is actually going on, so I have stepped aside and will wait for more clarity.
GLTA.
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