The usual time frame for these type of lawsuits to play out/settle is around two years.
You can track them on Pacer.
As of last week, the last time I checked, they were involved in mediation with lawyers for shareholders.
This suit is a bit more unique then others I've followed, in that it's not just the company that is being sued but it's executives on a personal level.
Spencer, Buss and the US side of the BOD personally sold 4 million worth of stock before the fraud allegations hit the wire. It would be a hollow claim of ignorance if they played that angle since Carnes wife released that inside info from before the acquisition date.
I'd like to see all that money returned to shareholders along with another 2M from their insurance company.
What's interesting is Zhang never sold a single share or raised a dime in the US that worked it's way to China.
That's not normal for Chinese frauds and one of the reasons I'm still playing the long side here.
Everything you state is pretty accurate, the problem is if the other guy on the end of the VIE is a thief there's not much that can be done about it on the US side.
BIDU and ALIBABA are both VIE's and market caps in the billions, so the basic structure of the VIE is not a big issue to me.
But if push comes to shove here Zhang is out of reach of US Courts in China and the VIE structure will allow him to walk away.
If BIDU started to have accounting/trust issues the share price would drop like a rock for the same reason....there's simply very little recourse for US investors when things go bad with a VIE.
Which brings us back to square one with FABU.
FAB is worth many multiples times it's current market cap if Zhang decides to keep the VIE intact.
However, the last press release indicated Zhang had given up on the VIE and is going back to running his own company in China; hence the 50% drop in the share price (30 to 15).
That would essentially turn back the clock and turn FAB back into Wizard.
In that case I guess there would be 10M shares outstanding and 6M worth of revenue. The Podcast business might actually be profitable at this point if you cut Spencer's and Busshaus back to where it was under Wizard (200K).
I think at this point Spencer is going to stay underground until the lawsuits play out as he pocked 2M himself...big money for a guy making 200K a year without bonuses. I also suspect he has very little intention of paying any of it back to shareholders.
And to make matters worse shareholder money is being spent to defend his actions.
"If a company has a variable interest in another party and that interest does not exceed 50%, then per generally accepted accounting principles (GAAP) those assets and liabilities do not have to be consolidated."
Far be it from me to defend someone I"ve called an idiot here for over a year now, but as they say....facts are hard thing to ignore.
You're statement is entirely correct. The problem is it doesn't apply here.
Remember the VIE structure was created to get around China's internal laws....they don't allow foreign ownership of Chinese companies.
Have to run....
FABU is headed wherever Zhang decides to take it.
The share price got cut in half with the last PR because it appears he has abandoned the US side...meaning FABU is pretty much worthless.
But if he decides to take the US side along then FABU will make a remarkable turnaround
My bet is Zhang continues to build the business in China and simply continues to use FABU as a shell company until he makes a final decision.
You'll know he's abandoned the US totally when Spencer starts yapping again followed quickly by him selling shares to pay his salary.
I'm hanging around until Zhang makes a decision. Might be a year or so, but eventually you'll see either Spencer selling shares or Zhang stepping up.
to become a publicly listed company on the UK exchange.
Now you don't have to guess what it's value is, you just have to check the current market price.
This was a smart move by NQ, as clearly the market was valuing Fl M at near zero...considering the total market cap of NQ.
I don't even know what a good or bad number would look like.
Does the market?
I think just filing at this point is a huge positive.
So if I get this right there's been a massive cover up going on at ARCP that's taken down 3 of the top executives and brought in the FBI all over a 4 cent charge?
There has to be a bigger picture/motive here that's yet to come out.
Sandi Arabia didn't start this to see it end in a few weeks, and the bottom is no where near in.
As long as the price of oil is tanking the price of oil related stocks is only going to head in one direction....see the trend over the last few months if you're confused.
If the price of oil jumped right back over 80 what lesson did the Saudi's teach the small producers....the answer is nothing.
There needs to be enough pain to shut down the small producers and for it to say down long enough to scare investors away form the sector going forward.
That doesn't happen over the course of weeks.
My guess is the price will stabilize around 40 dollars and stay there for a least 6 months to one year.
ESV will survive just fine (the dividend cut will come the end of 2015 if oil is under 50), but there is much more pain yet to come.
Yup, that's why all the deep water rig companies are tanking....because demand for their rigs is up.
Is that also why SDRL cut their dividend to zero? Because they need that extra money to build all those new rigs the market is demanding?
Class action? Where have you been? Multiple ones were filed over a year ago.
The main one is in mediation right now.
Wonder if Zhang made it over to participate. Maybe he did. Maybe that's how they found out about
the 85M purchase. He told them. Clearly they didn't find it out on their own...just like the bond.
So many questions, so little answers.
Thanks for the advice.
What makes you think I didn't sell the first week?
I'm just buying back in, and have no problem with the share price going lower.
Don't confuse the share price with the value of the underlying company. My thinking is at some
point Spencer will be yapping so much you won't be able to shut him up. It's his history....see Wizard.
He's never been much at building a company, but he is good at yapping....which is why Zhang hired him.
It's been about 6 years since I bought a stock for .10 cents that ran to 10 dollars.
I think I'm due, don't you?
Any why on earth would you buy FUTU? Spencer is actually running that company, just like he did Wizard. So far he's proven he's only good at selling shares to pay bills and stringing shareholders a long for the ride. He didn't make a dime running Wizard for nearly a decade.
You do know, according to all their SEC filings (the last one filed from Q2 2014) they were profitable every quarter?
As for the 16M bond, it was Chinese money and it will be paid back. Now if it was a US bond trading on an open market it would trade at a fraction of that price. But it's not, it's in China and I'm about 100% certain that bond will be paid back by Zhang.
The reason why the share price tanked from around 40 to 20 cents is the last PR put out by the company. Clearly most read that as a negative. Not me, I view it as proof Zhang is still alive and well and out to make money in China. FAB also hired some guy to work in China that represented the US side...I think his name was Song?...and my guess is that's the guy the passed that info back to the states (be it after the fact).
As for insider info, who cares at this point? It's a penny stock with an enormous spread and clearly no one knows Zhang's intentions either here or in China.
I'm waiting for the PR that states Spencer isn't being paid anymore by Zhang (400K a year to be a talking head). That would probably mean Zhang is moving on without bringing the US side along.
Remember Zhang prepaid that lease in LA to the tune of over 300K just a few months back and paid over 1M in an attempt to stay listed on the NYSE.
My guess is he's just waiting for the lawsuits to blow over to start up again.
It makes zero difference who the talking heads in the US are. Zhang is in control in China and that's all that matters.
You really think he picked Spencer or Busshaus for their business management skills?
All they did was lose money at Wizard for nearly a decade. They wouldn't know how to run a company if their lives depended on it.
Now Zhang, as far as I can tell, he knows how to make money.
Unlike other Chinese companies he took zero money from the US side. As far as I can tell he's only sent money over here (lease is over 30K a month as is US salaries). Wizard had to sell shares to shares to pay the bills before Zhang came along.
Whatever the value of Zhang's business in China it was created by him. If there's really 100M sitting in banks over there it's because he made it.
And if he wants to invest 85M of it to pursue the content side do you really think he needs the approval of the talking heads (what's really nuts is the talking heads don't even know that's what they were hired for....they actually think they get to make decisions)?
The question now is does Zhang feel the need to continue with the US side or just to go it on his own?
My guess is he's got a very large ego and connections in the gov. He can turn FAB's shares price around in a heart beat if that's the direction he wants to go....and my guess is that's the direction he'll take because that's where the big money and prestige is (or he wouldn't have partnered up with the talking heads in the first place).
If you're long the bet here is basic and simple.
Either Zhang is thief or not.
There's nothing in the US to liquidate (Wizard was selling shares to pay the bills before the acquisition)
and you zero chance of getting any asset in China without Zhang on board.
The 85M purchase without the approval of those that prostituted themselves to Zhang (for 4M) means to me Zhang is working on making money in China. There is no other reason for the notice. He doesn't need to justify where the 100M went as he can just disregard any US agreements and no can stop him.
Sometime after the lawsuits are over and the talking heads lift there heads out of the sand Zhang will tell them where the business stands and whether he wants to pursue a listing on a major exchange again.
In the meantime all we can do is wait.
FAB is either worth a few bucks (Zhang decides to continue and pursue a major exchange listing) or zero (he cuts and runs and leaves the US side to figure out how to survive on Wizard/podcast alone....which might be worth a few million if Spencer cuts his salary.
Nice thesis, but FAB does not fall into that category.
FAB neither raised cash through selling shares nor did they come public via the IPO route.
The 100M they show in the bank in China all originated from their Chinese subs.
The only ones ahead of the game here are FAB's US BOD, CEO and CFO. They sold a collective
4M worth of stock.
Now if Zhang is really a thief he probably planned to raised capital somewhere along the way. But in his defense he had over a year of trading on the NYSE to do it and it was never mentioned.
Shareholders of FAB have clearly lost money (one look at the share price tells you that), but it's not because Zhang raised US capital and then ran away. In fact, according to the last SEC docs and the Loeb report, all the assets in China are still producing profits. It's just the markets that don't believe a word of it.
As for me, my bet is Zhang is not a thief. Maybe a lot of other things, but all I need to generate a large profit here is for Zhang not to be a thief. May take a year to play out, but to make a 1000% or so you have to be patient (downside risk is 100% and very real).
The more I think about it the more I like this PR.
The worse case scenario here is FAB would go dark, never to be heard from again.
Well, we just heard from them. All indications are Zhang is alive and active.
As for the syphoning the cash angle, while it's a possibility and the way things are done in China the question one has to ask is why would Zhang do it?
He could just ignore the entire VIE agreement and run his business in China. No one will bother him.
So why clean up the books?
The only real answer is he just took Spencer and the US BOD on board (failures that they were) as talking heads for the NYSE listing. That being over, he's running the company the way he sees fit and is just advising the US side after the fact. I have no issue with that...the bet here was always on Zhang, not on Spencer.
If he's successful the US side will embrace him like he's a long lost brother and work hard to get FAB listed on a major exchange sometime in the future. In the meantime this PR is just letting shareholders know who's in charge inadvertently and covering their bases for lawsuits going forward overtly.
They can get off the Grey sheets anytime they want. The Pink is not much of any upgrade in my book, but it's a move forward.
Pretty clear Zhang was just using Spencer as a talking head for the US stock exchange. Seems his use is pretty limited until FAB gets listed again. In the meantime it appears Zhang is going to run his business the way he wants, using the US side in an advisory role only.
This really changes nothing. Spencer and the US side spent a decade trying to make Wizard profitable and failed miserably and the markets were growing tired of them....which is why they joined forces with Zhang in the first place. A bet on FAB had nothing to do with Spencer IMO, it always a bet on Zhang.
All that has changed is the BOD is officially letting shareholders know Zhang is in charge and they're just along for the ride (the US side only).
After thinking about this for a bit, I think the word "full" is the key one here.
All of the BOD over here came from Wizard, except for Rogers, Zhang and Gu.
My guess is Rogers, Zhang and Gu all knew about this transaction and approved of it, leaving out the members of the old Wizard....or at least informing them after the fact.
The deal makes perfect sense in that it's exactly what they said they were going to do (acquire content).
There was a previous incident to this a few months back when FAB switched auditors without the full consent of the BOD. In the end nothing came of that, apparently they all just got along.
I'm thinking it will play out the same way this time, and the news in a few weeks will be the announcement of this deal (and it's a big one).
The details will be very interesting, because if the content was bought from a legitimate company that can be tracked and verified it would speak volumes about FAB's cash being legit. If it's a small time company with bogus content then it's just Zhang cleaning out the books of the make belief cash.
"Interesting they feel this is newsworthy while being delisted from the NYSE was not."
After all the lawsuits that were filed because of the bond this is simply a hedge for protection against future lawsuits.
It's tough to figure out FAB at the moment. Spencer must have been comfortable enough with Zhang to sign off on the that lease deal in LA (which could BK the company) and according to court records Zhang is involved in the mediation hearings on going at this time.
It also makes zero sense Zhang would spend over a million to keep FAB listed, promise to play by the rules going forward, then go all rouge.
In the end there is value both here and in China. Wizard had a market cap twice the current one even before Zhang showed up and has annual revenues around 6M according to the last 10Q. China may be a mystery, but what we do know is there are three large stores there and enough money and assets to make Loeb happy.
As for the SEC, FAB trades on the wild west of exchanges that is littered with quasi legit companies. There are a million warnings related to Grey Market shares, I seriously doubt the SEC has any interest in FAB.
The irony to this is the PR just released states exactly what FAB stated they were planning to do going forward. If you would have just took out the BOD not knowing statement this would be welcomed as great news. Buying content and signing channel deals is exactly what FAB is supposed to be doing at the moment. My guess is the BOD found out about this deal because Zhang told them, straight up.
First off, I view any news as good news...since they pretty much have shut down the PR department.
525M RMB is about 85M US...meaning Zhang is either using an accounting gimmick to dispose of the 100M that really was never there or he has decided since the NYSE kicked him off there's no reason to consult the US side on his business decisions.
You'd have to have more info to make an intelligent guess (like what the content entails and who did he buy it from), but one thing is clear....the BOD's has about as much control over Zhang as I do.