The Game of Shorting China MediaExpress Has Been Exposed

| About: China MediaExpress (CCME)

A lot has been written about China MediaExpress (OTCPK:CCME). Who is right or who is wrong is still questionable, although my belief is that China MediaExpress didn't commit fraud.

That is why I would certainly appreciate a full inquiry by the SEC into this case.

It could be that China MediaExpress became the target of a misinformation campaign, which was initiated by short sellers attempting to profit by putting downward pressure on the stock through the use of such misinformation.

In the last several weeks that campaign has once again manifested itself. This seems to be part of a standard playbook used by people who call themselves "event-driven investors" who distort, or in some cases, simply make up information to manipulate the market.

The pattern is pretty clear: take short positions and then do anything in their power to engineer an outcome in their favor. This manipulative activity harms shareholders and ultimately harms the whole US capital market for Chinese companies.

There's a pretty clear pattern to this game. Here are the ten steps in the short sellers' playbook:

First: Identify a company which is highly complicated. China MediaExpress is a Chinese company and misperceptions are quite normal because of the language, etc.

Second: Find some fact. It doesn't matter if it is material or not. Find a way to take the fact out of context or distort it so it has little or no relationship to the truth and make it sound sinister and quite material. In the case of China MediaExpress, the number of buses and validity of some contracts and reports.

Third: Take your short position.

Fourth: Search out what we call research analysts, regulators, long investors and the media and tell them something bad is afoot. And, oh, by the way, don't call the company to get the real story. It will only get in the way of the distortion.

Fifth: Attack the credibility of management. Anonymous chat boards are the usual way to do this.

Sixth: Create the illusion of a groundswell of concern. Get the short-sellers in a syndicate, call the SEC, research analysts, long investors and press, and repeat your lies and distortion.

Seventh: Get a class-action lawsuit. More will surely follow. Law Offices of Howard G. Smith were the first one on Thurday February 3 to announce an investigation on behalf of investors.

Eighth. Go on the road and get every short-seller to pile on and pressure the stock down.

Ninth. Keep reminding everyone that the shorts uncovered Rino International.

Tenth. If everything goes according to plan, the stock goes down and you profit. And, as an added bonus (and this is their favorite part) if people figure out this is a game, go long and you ride it back up.

The game of China MediaExpress has gone long enough and it has to be exposed for what it is. So where are the regulators? Where is the Securities and Exchange Commisson (SEC)?

Who is behind this? Read my previous article.

Disclosure: I am long OTCPK:CCME.

Additional disclosure: On February 4 I sold far out-of-the money put options March 5 and 7.50.