The recently announced non-binding going-private proposal of Tibet Pharmaceuticals (NASDAQ:TBET) by its CEO caused quite a stir among its shareholders. I was first partially convinced that TBET should have had the means to finish the deal.
However, after reading this announcement from Pan Asia Assets and Equity Exchange Center, to me, all bets on TBET are off (You can use google translation to get the rough idea).
In a nutshell, Pan Asia is auctioning the tangible assets and the majority of the intangible assets of TBET upon the local supreme court's injunction. Regardless of the outcome of the auction, TBET is already unable to sell any of its products, because it is already stripped from its manufacturing facility and very importantly, its licenses for producing ALL of its commercialized drugs. It has been confirmed that the supreme court's injunction is a directly result of TBET's 30 million RMB overdue loan owed to Agricultural Bank of China.
It surely doesn't make sense given TBET's latest financials (several times more than 30 million RMB in net cash alone) - if they are truthful.
After further research, I have found out that the auction is going to take place on 20th this month. I have confirmed the validity of this auction with both Pan Asia and the local supreme court judge. Also, TBET's registered phone number in mainland China is suspended due to unpaid phone bills. Its own IR person, Fiona Wang, was as well unreachable via her cell phone during working hours. I believe not to take any phone call has become the company's policy, if there is still a real company to speak of.
And yes, this Tibet Pharmaceuticals is the very same Tibet Pharmaceuticals that TBET's VIEs hold contractual interests in. From its prospectus:
Our principal executive office is located at 53 Niwang Road, Shangri-La County, Diqing, Yunnan Province, China 674400. Our formal corporate mailing address is: Room 1701, 17/F, 90 Jaffe Rd., Wanchai, Hong Kong. Our telephone number is (+852) 9798 5569. Fax (+852) 3020 1055. We do not maintain a corporate website at this time.
The address provided here in English is exactly the same as the address provided from the Pan Asia auction announcement in Chinese (can be found from Pan Asia's announcement, first link I provided above): 迪庆州香格里拉县建塘镇尼旺路53号
Ask someone who can read Chinese to confirm this if you have any doubt.
Moreover, TBET is holding back information regarding this ongoing auction from its formal PR firm and current auditing firm, needless to say about SEC. I say formal PR firm because it has just terminated its contract with TBET, yet because of some weird rules I can't really comprehend it cannot make an announcement about this resignation without TBET's consent (it didn't get TBET's consent because TBET has been unreachable). On the other hand, TBET still has the link to this PR firm on its own website. Call the PR or the auditor yourself. I wouldn't be surprised if TBET's current auditor follows its predecessor's suit very soon. Their lawyer is very busy, so I had no luck yet reaching him. I guess given that he is lawyer himself, he would be less troubled than other related parties. So, we've gotten a high turnover of TBET's auditors, PR firm, and of course there is just in a new CEO for TBET. Could the new CEO be the fall guy when everything settles?
Let's not forget what VIE really holds, by the way. To my understanding, VIE is very similar to SPE, and to some degree, includes SPE. In essence, I see nowadays they both are often used to exploit the differences between legal obligations and accounting standards - in fact, when you have a right mix of professionals working for you, only morals are the limits. I believe most of the people reading this article here already know how SPE made its debut as a world-renowned entity. TBET has a VIE structure, just like many other Chinese companies got listed overseas.
Finally, let's not forget that TBET cares only to publicize its non-binding going private proposal.
As a conclusion, TBET will very likely be a terrible bet if people are counting on its "non-binding going private proposal" to realize.
Disclosure: I am short TBET.