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Blogger, Self-Made Analyst, Trader, Investor, Crowdfunder and Critical Thinker. Currently, I am looking for a job in the investment space. Job offers are always welcome.  The name "Dutch Trader" refers to The Golden Age. This was a period in Dutch history, roughly spanning the 17th century,... More
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  • The War on China MediaExpress Holdings  6 comments
    Feb 7, 2011 6:04 AM | about stocks: CCME
    In my article: Shorting China part of a bigger planhttp://seekingalpha.com/article/250267-shorting-china-stocks-part-of-a-bigger-planI started the discussion about what the reason could be for investors/traders being so negative in regard to China and Chinese companies.

    I am convinced China MediaExpress Holdings (CCME) plays a minor role within this debate, although the fact that the company is a major victim of short selling. Short selling in itself is not illegal and widely used by traders to make money when they think that a share price is likely to fall. However, it is illegal when a trader deliberately tries to force the share price to go down by spreading rumours and false facts about the company. These trades are known as "trash and cash".

    Many US-listed China companies had to face systematic attacks by short-sellers. In most cases discrepancies between SAIC filings and SEC filings were the trigger for decreasing stock prices. In respect to China MediaExpress the misunderstanding about buses and contracts was a hot topic. The report of Muddy Waters is accusing China MediaExpress to inflate their numbers.

    Would it be a major corporate scandal if not all the information is as clear as should be. Would be the value of the company at stake? If there were some minor differences I don't think the estimated value would be $5.28 as Muddy Waters calculated.

    Most companies, that are under attack by short sellers choose to ignore them out of a concern for dignifying them or publicizing them. The fact that China MediaExpress on Monday announced a detailed letter available to their shareholders on its investor website is a positive sign. The letter is available at theInvestor Relationssection of CCMEs website, www.ccme.tv/eng/ir/irprofile.php

    Transparency is a two way street, so I would certainly appreciate a full inquiry by the SEC and the NASDAQ concerning the misinformation used by Muddy Waters and others to manipulate the market.

    The deliberate circulating of negative rumors and shady facts by amateur hedge fund managers; aiming to push prices down because they were short selling stocks is having a major impact on the US-listed China market's integrity. A lot of reports that have recently been published have a very short time frame, which gives you a uncomfortable feeling. Because you are really going to think: Is shorting China really part of a bigger plan?

    The fact that "long-only" managers are not trading CCME. Who the hell was selling like crazy last week
    Long only managers have increased their positions in the company.  www.nasdaq.com/asp/holdings.asp?symbol=C...
    Many traditional long-only managers design their portfolios to perform over the next six to twelve months. Hedge funds attack the resulting inefficiency from both sides. They do not care whether a stock is going to do well in one year or not. They want to perform well today or this week or, at worst, this month. These funds usually hold positions for a short period of time

    A lot of them are "black box" funds, where computer programs tell them what to buy. Other are news driven and want to know whether the next piece of news, or "data"point," will be positive or negative. Some of these short-term-oriented funds rely on technical analyses, the study of security trading patterns, to decipher the likely near-term future direction, while others rely on the manager's trading instinct, feel and experience.

    Many of the "black box" funds use a combination of insights, and some have been quite successful. These type of fundstend to have little to none transparency. Nobody on the outside really knows much about the portfolio

    Source: Interactive Data Management Solutions AG

    These black box” funds could also have been playing a part of the giant move in China MediaExpress Holdings last week.

    In case of China MediaExpress Holdings (CCME) fact-based articles like the one of Michael Anderson are more reliable, than the accusative articles without merits.

    analysts of Global Hunter and Northland who did an amount of due diligence and groundwork in China are whipped out and not taking serious anymore; despite the fact that they have more knowledge and insight in the company than any of us.

    Last December the Wall Street Journal mentioned that the SEC (Securities and Exchange Commission) was going after Chinese RTO firms. Taking into account the negative reports published lately, you could start to think some kind of cold war is going on between the U.S. and US-listed China companies, Having their own strong believes about how to run a business, and meeting at the battlefield of the stock exchanges.

    Although no weapons are involved, the amount of money makes it worth to fight for. So the fight between longs and shorts will continue. After all: "It's not the short selling that's the problem, it's the damage to the integrity of Chinese companies”.

    Where are the regulators? Where is the Securities and Exchange Commission (SEC)?

    Disclosure: I am long OTCPK:CCME.
    Stocks: CCME
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Comments (6)
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  • Alfred Little
    , contributor
    Comments (478) | Send Message
    Hi Dutch,


    The "bigger" plan is simply to expose every fraudulent Chinese U.S. listed company. The shorts are doing the job the SEC and regulators have (no surprise) failed to do. This is the free market at its best, separating wheat from chaff.


    There are indeed very smart funds long these stocks. I personally believe that the china theme, when the sector was hot before, hooked a lot of "smart" but fast money. Now some funds are stuck. Many are worried. They know they didn't do much DD.


    The shorts are smart too, capitalizing on the possibility that many RTOs are frauds, something that is increasingly likely. I believe their reports deserve more respect. After all RINO, the biggest fraud exposed to date, admitted as such.


    So far, the only clear culprit in all this are the companies being targeted themselves. None of them so far have been able to clearly defend themselves with any real evidence, despite the fact that the companies hold all the cards. They could publish SAICs, SATs, bank verifications, contracts with customers, etc, etc. But they don't.


    CCME's CEO letter contained nothing meaningful to refute the charges. Given their Big 4 and Starr backing they should be capable of mounting a very detailed rebuttal. I wait patiently for CCME to provide some tangible evidence.
    10 Feb 2011, 04:15 AM Reply Like
  • Dutch Trader
    , contributor
    Comments (1313) | Send Message
    Author’s reply » I agree with you Alfred that the SEC clearly didn't take their responsibility.


    For the shorts I would recommend, confront management first with the findings in private and then publish the report. David Einhorn and some other famous short sellers had that approach many times. So the company in question can explain before instead of afterwards.
    10 Feb 2011, 05:37 AM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2532) | Send Message
    I have confronted many of these chinese companies. I have found that they don't explain anything satisfactorily.
    14 Feb 2011, 01:33 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2532) | Send Message
    Response to the article:
    I think Muddy Waters valuation of CCME at $5.28 is wildly overstating its value.
    CCME's letter, by itself, is something that convinces me by itself that they are a fraud. They do none of the things I would expect them to do if they were legitimate.
    The only relevant transparency is CCMEs, as Muddy Waters and others are presenting information regarding CCME. If you thought it through before writing, you would realize this.
    The Muddy Waters report and others provide verifiable facts and sound reasoning, not negative rumors nad shady facts. If you could dispute any of these easily verifiable facts, I am sure you would.
    who was selling like crazy last week? Perhaps CCME is a manipulated stock with phony trading between those who own the stock to try to keep its price up.
    MIchael Anderson's articles are very poor, bereft of fact and logic, full of false statements. He even writes pumping articles about a stock while he is selling the stock he owns, which is the very definition of pump and dump.
    Global Hunter is a small investment bank catering almost exclusively to these small cap chinese companies who appear fraudulent, they make their money off these companies and are promoting them. They are not independent analysts. Ditto with Northland.
    SEC is going after these Chinese RTO firms because they are fraudulent.
    These chinese companies small cap frauds don't have any integrity and the truth about them is being revelaed.
    The regulators and the SEC are looking into these chinese small cap frauds.
    14 Feb 2011, 01:41 PM Reply Like
  • Dutch Trader
    , contributor
    Comments (1313) | Send Message
    Author’s reply » I would be pleased if the SEC really is going to make an afford to look which ones are fraudulent. I really believe the outcome would surprise the short sellers. There are a lot of Chinese companies listed in the U.S. that have our standards of business integrity. Look for example to American Lorain (ALN), that's why I wrote an article about it.




    I verified some things myself and would put my hand in the fire for this company.
    14 Feb 2011, 01:58 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2532) | Send Message
    I wouldn't rely on the SEC's determination to conclude that a company is not fraudulent. That is not what they do. I can due diligence and have a brain, so I can determine for myself what companies are fraudulent. I can hear you now telling me Bernie Madoff is legitimate because he was cleared in numerous SEC investigations, while I explain to you in clear and simple terms why there is no way he can be making the returns he claims with the strategy he employs. Nothing is more important than to be able to think properly through the facts. CCME is clearly a fraud, which can be determined in 15-30 minutes reading their 10k. They claim to be making tens of millions of dollars put tv screens and hard disks on buses, for free, then selling advertising. Try that out, see how it works out for you. Its not working any better for CCME. That is not a business plan, that is a fraud story masquerading as a business plan that anyone with a brain can tell is a certain money loser.
    14 Feb 2011, 04:26 PM Reply Like
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