FAB: Where Are Your Beijing Media Kiosks?

| About: FAB Universal (FU)

As noted in my original report, FAB Universal (NYSEMKT:FU) claims to have 16,820 media kiosks in China according to its Q3 2013 earnings press release. Furthermore, in its 6/1/12 proxy FAB claimed that 3,954 of its media kiosks were located in Beijing. I challenged FAB to disclose the locations of its Beijing media kiosks so that investors could independently verify them. In almost four weeks since I published my report, FAB has failed to publish the kiosk locations. In the absence of a list from FAB:

  • My investigators found a total of only 20 FAB media kiosks in Beijing. 16 of these kiosks were deployed in FAB's flagship SoShow store.
  • FAB's Chinese website lists 13 FAB store locations. 7 of these stores appear to be nonexistent or out of business. The flagship Joy City store has been shut down for "remodeling." 4 smaller FAB stores had only 1 kiosk each.
  • Using Chinese Internet searches my investigators found an additional 17 possible FAB media kiosk locations. However, none of these locations had any FAB kiosks.
  • FAB's Chinese website customer support hotline staff were unable to provide my investigators with any additional locations.

As ridiculous as it sounds, I could only locate 20 out of approximately 4,000 media kiosks FAB claims to have in Beijing. I certainly believe that there must be more than 20, however, the difficulty finding these media kiosks indicates that the true total is certainly a small fraction of the 4,000 that FAB claimed. I urge anyone aware of any locations that I missed to let me know, so that I can promptly update this report.


The most logical place to commence a search for FAB's media kiosks is FAB's own Chinese website (fab.com.cn). However, FAB's Chinese website has no media kiosk locator (a major red flag). Instead, FAB's website simply presents a list of 13 FAB store locations, including the flagship SoShow and Joy City stores. A screenshot of the list of store locations from FAB's website appears below:

My investigators recorded their visits to each of the 13 locations. 7 of the 13 locations no longer existed and had no media kiosks. The Joy City store is still closed for "remodeling."

FAB's flagship SoShow store has an eye-popping 16 media kiosks on display. Considering the SoShow store's basement location and lack of customer traffic, the main purpose of these kiosks appears to be to fool investors. FAB's remaining 4 small stores had only 1 kiosk each.

By comparison, Redbox (NASDAQ:OUTR) generally deploys no more than two kiosks to serve the thousands of daily customers at a typical Walmart Superstore. Check it out for yourself by inserting your ZIP code into Redbox's kiosk locator. Real companies with real customers, like Redbox, readily publish and update their kiosk locations. FAB does not.

The following table summarizes my findings:

Extending the search beyond FAB's Chinese website, my investigators conducted Chinese Internet searches to locate and then recorded visits to an additional 17 possible FAB media kiosk locations. None of these visits turned up any additional media kiosks.

My investigators also called FAB's customer service hotline (a cell-phone number) on its Chinese website (shown below) to find additional Beijing media kiosk locations. The support staff explained that he was unsure of any locations beyond the 13 disclosed on the FAB's website. He promised to confer with his colleagues and then call my investigators back. His eventual response was simply to advise my investigators, via a text message, to visit FAB's SoShow store.

So where are FAB's 4,000 Beijing media kiosks? FAB so far refuses to say. In FAB's Q3 2013 earnings conference call, held on 11/14/13, CEO Chris Spencer made the excuse that it takes time to translate the locations:

"Many of you have asked for a map or a list of the exact locations of our 16,820 kiosks as well as full listings of our content offerings. We will be populating our website with more information as it's translated although it's taking time to complete the translation. We expect to have this available as quickly as possible."

The "translation" excuse fails to explain why 7 of the 13 store locations from FAB's Chinese website do not even exist. I believe FAB's delay in publishing a list of media kiosk locations is quite simply because most of the kiosks do not exist.

Unfortunately, FAB's U.S. management and independent directors appear to be doing nothing to protect investors. I offered to meet with CEO Chris Spencer, Jim Rogers, and the other independent directors to show them all my evidence. None have accepted my offer. FAB's auditor, Friedman LLP, has also not accepted my offer to meet to review the evidence. It appears that all these "gatekeepers" are content to let FAB's Chairman Hongcheng Zhang take as much time as he needs to try to cover up his fraud.


I continue to challenge FAB to publish a detailed list of locations to allow investors to visit and confirm the existence of FAB's vast purported network of media kiosks. I am absolutely convinced that FAB's media kiosk count is fabricated and I believe that Chairman Zhang Hongcheng is actively covering up this fraud as best as he can. Zhang, like other Chinese fraudsters, will probably never be held accountable. But it's high time we hold FAB's U.S. management, auditor, and independent directors responsible for failing to protect investors.

Disclosure: I am short FU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.