"The US courts might make a determination to levy some of the personal assets of the US officers here, (pierce the corporate veil) ..."
Spencer is being sued directly in a separate lawsuit.
He may claim the corporate veil, but it won't work. Those were his insider sales and he profited to the tune
of around 2M.
It's why he's so quiet. He's not worried about FAB's lawsuit, he's worried about his own.
=Stop taking one sentence and building a case out of it.
" But this "one sentence" is a complete lie:"
In your idiot opinion .
Grey sheets stocks have zero reporting requirements.
The SEC is meaningless. If it came to it FAB can deregister at any time and would continue trading.
Why do I have to dumb everything down for you?
You need to look beyond the obvious.
The market pays for growth.
VJET is expected to grow at 50% next year.
XONE's growth is less than half that.
Beyond that there was a reason VJET ran from 13 to 70. You need to look into that.
JASO is Chinese company and will always trade at a discount because of that. If you don't
know the risks Chinese stocks have you need to educate yourself.
Stop taking one sentence and building a case out of it.
Grey Sheet stocks have zero reporting requirements because there's nothing to kick them off of.
The 300 shareholder rule is "best guess" as far as the SEC is concerned, and if FAB decides to go dark
all it takes is 5 minutes of paperwork.
I know stocks that have traded for years on the Grey Sheets that as far as I can tell haven't filed anything in that time (VALV is one).
"Deregistration under Section 12(g) and Suspension of Reporting Obligations under Section 15(d)
Once delisted, a company may nonetheless be required to continue reporting pursuant to Section 12(g) of the Exchange Act if it has more than 500 holders of record and total assets exceeding $10 million, or pursuant to Section 15(d) of the Exchange Act if it at any time had an effective Registration Statement under the Securities Act of 1933.8 To avoid this result, a company can deregister under Section 12(g) and suspend its reporting obligations under Section 15(d) if it has less than 300 shareholders of record.9 Section 15(d) reporting obligations may be automatically suspended if the issuer had less than 300 shareholders of record10 on the first day of its fiscal year."
FAB is NOT required to file as long as they're on the Grey Sheets. There are plenty of loopholes, this is just one.
As far as the lawsuits are concerned, my guess is the insurance company will put up around 2M, which seems to be a common number in my experience.
But the insider selling is what's keeping Spencer's mouth shut. He personally sold 2M worth of stock, and he's in the US with assets listed under his name.
All this means little to me, however. I'm still of the believe Zhang sees value in FAB or he wouldn't have spent over 2M himself last year trying to keep the NYSE listing. Once the lawsuits play out there's a reasonable chance he'll reinvigorate FAB to set up for a future listing. In the meantime the Podcast business was generating 6M in revenue a year on it's own. That has to be worth than the current market cap of FABU.
The VIE agreement for FAB is very similar, if not exact, to those of other multi-billion dollar companies in China. It's the last thing I worry about.
The only thing that matter is this:
"The future success of DEI depends substantially on the continued services of its executives and its key development personnel, such as Chairman, Zhang Hongcheng, who has been instrumental in the development of the FAB business."
For better or worse Zhang is FAB. If he decides to continue to pursue a US listing FAB will recover just fine. If he decides he's had enough of the US then it's value is only the value of the Podcast business (probably 2 or 3M).
Spencer and company are keeping their collective mouths shut because they are being sued personally (not just FAB) by various shareholders. Spencer and company sold nearly 4M worth of stock and that is subject to US laws and can be disgorged from them through US courts.
The odds are shareholders will be left in the dark until those suits play out...for good or for bad (which is why I'm thinking this is about a one year play).
My bet is Zhang will continue to grow and transform his business in China (see the last PR) and once the lawsuits are settled in the US he will again seek a US listing. He did it he first time because this is where the big money exisits and nothing has changed.
I'm hoping they file quarterly docs at some point, but they are not required to as long as they stay on the Grey sheets.
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.