China 3C's Price Declines on Bad PR

I have done quite a lot of Hawk Associates bashing and here is more. Hawk was the IR firm for China 3C Group (CHCG.OB) until recently and now there is direct evidence that a hedge fund dropped the company's shares because of poor communications.

According to Guerilla Partner's Peter Siris (who was an investor), during a conference call with the company last August, a question was posed about comp-stores sales. Not only did the question stump CHCG's management, other basic questions also went answered. The resulting sell off by Guerilla Partner brought the stock price from $6 to around $4, and it has not recovered since. Siris was unequivocal about why they sold: bad communications "killed it".

So now that we have ICR's Bill Zima instead of Hawk Associates, I'm hopeful that things will be better. But since the IR switch which happened on 1/15, we haven't heard a squeak from management. What is happening? Is there good news on the horizon? And are we too late to lure back the likes of Guerilla Partners? I think the longer this state of silence goes on, the worse it is for generating investor interest. Which is sad, for even Siris acknowledged that CHCG is a company with "lots of cash, no debt, (and) strong earnings". Just goes to show the importance of good IR.

My Position: Long.

Comments

[Atticvs Res...:]

I was of the opinion that the main reason for the drop in CHCG share price was the failure of the company to consummate a large financing package a couple of weeks after the company announced that it was largely a one deal. The communication problems that Peter Siris mentioned have indeed existed but only as contributory issues to the weak share price.

2008 Feb 11 11:20 AM

[Brij Dhano:]

Zima and the Firm are useless. Hard for me to believe that they dropped Hawk and replaced IR with these guys. Say what you want but Hawk was available, informative and not arrogant, much unlike their apparant replacement, but who knows. It's worth noting that any IR effort is only as good as the information provided to the IR firm. No gun is effective without bullets.

Hawk has had excellent success with other companies that provided good information. Just check their website.

In the meantime, look what has happened to the price since Hawk was replaced on 15 January. The price that day was $3.91.Now it¹s $2.77.

Down 29%.

That suggests that maybe the problem is not with the IR firm.

2008 Feb 12 01:56 PM

[china_investor:]

Most IR firms in this space are terrible. I have been around a long time and have been to China many times working with companies. Hawk deserves criticism here but they don't deserve to be singles out. Take a look at the press release Hawk put out today for UTVG. It is horrible. GFRE a couple of days ago, also horrible. CHCG probably didn't solve their problem by changing firms. There are good IR firms out there though and these guys need to find them. I may start a blog to help. I'll let you know.

2008 Mar 05 11:46 AM