Matt, the smart short players will try quick in and outs on this but largely will stay out of the way of this raging bull. It's the customers not the stock players that most influence the future of FMCN. Based upon my read of your articles and your background I believe you to be an intelligent investor that has long since covered your shorts. So you can stop playing this worn-out song.
I am still very short both FMCN and QIHU. I am not a momentum trader. I invest in the gap between the Price and the Value of the underlying asset (both long and short). The gap closes often enough for me to profit. I believe it will close here as well.
Yesterday was FMCN’s turn to say whatever it wanted to say. That is over now. As for the influence of customers? Do you mean Deloitte’s clients? Don’t forget the regulators. The next big event for FMCN is the audit and filing of the 20-f. The game from here on is PCAOB+SEC pressure on Deloitte and Deloitte’s need to restore its reputation among present and potential clients. That adds up to my BET that the “Deloitte-umbrella” will be sure that China-based Deloitte performs a serious audit, will not sign off on the 20-F and that FMCN will then be halted and/or delisted. We will find this out sometime between now and April 30. If I’m wrong about this event and if the Chinese economy holds up, then I lose.
Until then, I’m in … since nothing has changed in the basic case against FMCN (FMCN has merely claimed a refutation; they have certainly not demonstrated one). The case stands and it is forensic. The regulators and auditors will not be as unsophisticated as the retail investors that have piled into this thing. As for those who are not retail investors, but who are professional traders, being professional, they will turn when the momentum turns (if they don’t get clotheslined first with a stock halt).
Besides the strong case against FMCN, FMCN has made a very good case against itself: their statements add up to the inflation and misrepresentation of their LCD and theater assets. These past numbers have been carried forward in the form of equity. You can’t just pull out an eraser and change the value of an asset without finding changes necessary in other statements and succeeding years.
And the phantom acquisitions: FMCN needs to come up with six WFOEs for the “handset six” … where are they? They need to explain why they did not change the nominees for the VIEs. And how can they claim control of these six without documenting the above?
The gorillas in the room however are the massive write-downs. Nonetheless, it may all end very simply: expect bank confirmation procedures to be very strict this year -- so both longs and shorts could smile yesterday when looking at the cash on the balance sheet. (-- sometimes we all get along.)