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ChinaCast Education Corporation (CAST) Message Board

  • inncogneeto inncogneeto Sep 20, 2012 6:13 PM Flag

    Some recovery likely

    It now seems more likely than not that the company will eventually regain control of legal ownership of the universities. Operationally we are told the company is not only intact but that enrollment is up and that employees have completely distanced themselves from Chan and his criminal gang. It makes sense that once it became undeniable what Chan was and what he had done that it would then be easy to choose sides. If you are not a criminal who wants to be involved with that? So it appears that clear separtion has taken place between who the good and bad actors are. Given the clarity of the crimes it is highly unlikely the Chinese courts have any incentive to do anything but see the legal issues properly resolved on behalf of the company. The cash is likely all or mostly gone but the business itself and the cash flow it generates is very valuable. We are one announcement away (a negotiated or court ordered return of the licenses) from seeing a significant recovery of value. $3 to $4 per share could be quickly achieved. So if you believe the company has a 50/50 chance of recovering the licenses where the upside is $3 (to start) if they do and the downsize is zero then purchasing the shares at $.50 with a 6X return vs. a total loss with even odds sounds like a pretty good bet. I think I might have to take that one!

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    • I was speaking to a banker that is knee deep in the Chinese mess and he said he believes the company may work out a pay-off with the people who received the fraudulent ownership transfer (the VIE shareholders). They have something they can't really do anything with and face great uncertainty and a potential legal nightmare. There is some price at which they would likely settle with the company to return the ownership and have the company drop all action against them. Essentially a legal extortion pay off. There is certainly a price at which this would be worthwhile for the company and very profitable for the criminals involved. Kind of like paying off the pirates to get your ship back. This certainly seems plausible.

 
CAST
0.0402+0.0022(+5.79%)Apr 17 2:08 PMEDT

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