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Focus Media Holding Ltd. Message Board

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  • matt.berry01 matt.berry01 Mar 9, 2012 10:51 AM Flag

    Thoughts from a long time investor

    >>Many of the items in the Muddy Waters report are issues that we already knew about and do not constitute fraud.

    Many of the aspects of Madoff’s life were not fraudulent. That does not remove the frauds he did commit.

    >>Bad investments or bad decisions by FMCN aren't necessarily fraudulent.

    You can’t remove a lie by pointing out a truthful comment.

    >>The bad investments or decisions are already priced into the earnings result and stock price.

    But not the regulatory risk.

    >>>I have read Matt's opinions and he doesn't understand half of what he is talking about. He talks about the change in theater count. I agree that it was changed, but then he claims that they came upon their initial number of approximately 27,000 by using total number of ads run on movie screens. That is not how they calculated it previously according to company documents.

    You obviously did not READ my article: http://seekingalpha.com/article/343211-focus-media-s-explanation-comes-up-short-part-2-the-theater-count

    >>Also, the LCD count. I agree that it is odd that cardboard posters were counted in the LCD number.

    Not odd, but fraud. http://seekingalpha.com/article/343191-focus-media-s-explanation-comes-up-short-part-1-the-lcd-count

    >>However, the company has explained why and how they classify everything and that is legit.

    The altered and convenient redefinition of “theaters” and “LCDs” does not correct the lies; it exposes them.

    >>The other problem would be investors who felt the company had more assets than they really do (digital screen obviously has more net worth than cardboard). Of course if the assets, profits, revenues, etc. are reported correctly, then there is no fraud.

    And if reported deceitfully, then we have securities fraud.

    >> There are some holes in some of FMCN's stories, but plenty of holes in Matt's stories as well.

    Examples please.

    >>He is accusing FMCN of making stuff up, but then fabricates plenty of his own.

    Again, you are making a very serious accusation. Examples please.

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    • Okay, Matt I will use just one example (the screen count). In the article you linked and wrote:

      http://seekingalpha.com/article/343211-focus-media-s-explanation-comes-up-short-part-2-the-theater-count

      FMCN says:
      Prior to 2009, we calculated the size of its movie theater network by calculating the number of screens on which each of its advertisers had purchased advertising and then summing the screen count for each advertiser to produce an aggregate number of screens. (Amended SEC 20-F)

      Later in the article you say:
      Not true, those were 27,164 purchased advertisements."

      That is two different things. 27,164 was not the number of purchase ads as you have claimed. Rather 27,164 was number of screens on which each of its advertisers had purchased advertising and then summing the screen count for each advertiser to produce an aggregate number of screens. There is a difference.

      Let me give you a fictional example. Let's say in a Memphis, Tennessee there are 5 movie theaters. Each movie theater has 10 screens. Xerox decides to run 5 ads on each screen, Home Depot runs 4 ads on each screen, and Ford runs 3 ads on only 4 screens in one theater.

      There are four ways to give numbers:
      1. We have 5 movie theaters using our ads.
      2. We have 50 screens using our ads. (5 theaters with 10 screens each).
      3. We have 104 screens (this was FMCN method of Xerox runs on 50 screens, Home Depot runs on 50 screens, and Ford runs on 4 screens. Add 50+50+4. That equal 104.)
      4. We have 462 screens (Matt accuses FMCN of doing this, which is adding up the number of adds. Xerox runs 250 ads (5x50), Home Depot runs 200 ads (4x50), and Ford runs 12 ads (3x4). That equals 600).

      I think Focus media should have used the number of theaters (5) or the number of screens (50). They chose the calculate it and get 104. Matt accuses them of scenario #4. FMCN may have done some fuzzy math here, but not in the way Matt is accusing them.

      • 3 Replies to nugget3434
      • Edited to say that it should not have read:

        4. We have 462 screens (Matt accuses FMCN of doing this, which is adding up the number of adds. Xerox runs 250 ads (5x50), Home Depot runs 200 ads (4x50), and Ford runs 12 ads (3x4). That equals 600).

        Rather it should have read:

        4. We have 462 screens (Matt accuses FMCN of doing this, which is adding up the number of adds. Xerox runs 250 ads (5x50), Home Depot runs 200 ads (4x50), and Ford runs 12 ads (3x4). That equals 462).

      • >>Rather 27,164 was number of screens on which each of its advertisers had purchased advertising and then summing the screen count for each advertiser to produce an aggregate number of screens. There is a difference.

        The screen count is as ridiculous as the theater count. Both are impossible. There were less than 4,100 urban screens in all of China in 2008. See http://www.scribd.com/doc/78114133/A-Critical-Failure-in-the-Focus-Media-Story-FMCN

        The FMCN sentence is calculated to confuse and it has worked. If it refers to screens, then the screen count is just as impossible as the theater count. It would also mean fraud, so if I were a long investor I would not want it to refer to screens. The only way the number can work is if it refers to some version of "ads purchased" ... as your example suggests:

        *******Nugget
        Let me give you a fictional example. Let's say in a Memphis, Tennessee there are 5 movie theaters. Each movie theater has 10 screens. Xerox decides to run 5 ads on each screen, Home Depot runs 4 ads on each screen, and Ford runs 3 ads on only 4 screens in one theater.

        There are four ways to give numbers:
        1. We have 5 movie theaters using our ads.
        2. We have 50 screens using our ads. (5 theaters with 10 screens each).
        3. We have 104 screens (this was FMCN method of Xerox runs on 50 screens, Home Depot runs on 50 screens, and Ford runs on 4 screens. Add 50+50+4. That equal 104.)
        **************

        RE #3: How is this not a version of ads purchased? It certainly does not represent the number of screens, which you admitted was only 50.

        And using your method, how do you take the number 27,000 and the number of theaters pre and post the fiasco (less than 300) and make your numbers work?

        >>>>4. We have 462 screens (Matt accuses FMCN of doing this, which is adding up the number of adds. Xerox runs 250 ads (5x50), Home Depot runs 200 ads (4x50), and Ford runs 12 ads (3x4). That equals 600).

        You misunderstand. I have not refuted FMCN. FMCN has refuted itself through its own filings.
        In 2008, there were
        Less than 1,600 theaters
        Less than 4,100 screens.

        FMCN claimed 27,000 theaters and did not correct the definition of theaters until caught red-handed by Muddy Waters, saying in a very convoluted way that the number 27,000 meant neither theaters nor screens. The ONLY way to account for the number 27,000 is to "re-define" it as ads purchased, as you did with your Memphis example. Even a five-year old would not fall for this.

        >> I think Focus media should have used the number of theaters (5) or the number of screens (50). They chose the calculate it and get 104.

        And this does not give you pause? You raise your own red flags and then choose not to see the red in them??!!

        >>>Matt accuses them of scenario #4. FMCN may have done some fuzzy math here, but not in the way Matt is accusing them.

        Disregarding any disagreement with you on other points here, how can FMCN’s “fuzzy math” ever be a good thing?

      • >>Later in the article you say: Not true, those were 27,164 purchased advertisements."

        No, I don’t say this. FMCN says this. I present a condensation of FMCN claims through the years. The passage presumes you read the SEC citations earlier in the article and is a paraphrase of them … a “debate” between FMCN 2010 and FMCN 2012. Here is the actual passage from my article:

        **************Matt’s SA article:********
        Focus Media in not so few words has basically debated with itself before the SEC and investors:

        Dec 2010: "As we've been telling you again and again for the last two years, we had a network of 27,164 theaters."

        Jan 2012: "Not true, those were 27,164 purchased advertisements."

        Focus Media has cornered itself. Its past revenue is highly suspect. Just as apples are not oranges and poster frames are not LCD displays ‒ 27,000 theaters are not 27,000 purchased advertisements.
        *********************************

        >>>That is two different things. 27,164 was not the number of purchase ads as you have claimed.

        No, re-read FMCN’s correction in the last 20-F. Also, there is no other way to account for the number “27,000.”

 

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