Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Timing is Everything: What do Bear Raids, The Chinese New Year, Reg. SHO, and CCME All Have in Common?

|Includes:China MediaExpress Holdings, Inc. (CCME)

The more I just think about the timing of the CCME short attack the more I am convinced that fraud claims by Muddy Waters, Citron Research, and Bronte Capital are completely unfounded. I have been long CCME since this summer, trading in and out pretty actively. Unfortunately I was long most of last week.

CCME will report full year earnings and file their 10-k the week of February 28th. I think probably late in the week is a good guess, maybe March 3rd or 4th. I say this because CCME is an accelerated filer, as well as the fact that they will be presenting at two conferences: Rodman conference on March 7-8 in Beijing and the Roth Conference on March 14-16 in Orange County, CA. CCME is not going to present at a conference before their earnings release. So where does that all leave us? CCME's auditor Deloitte Touche Tohmatsu now has approximately 20 days to sign off on their 10-k audit. I think its pretty much crazy to believe that this far along in the second full year audit that DTT would find any sort of fraud? I doubt that. So I asked a CPA friend of mine who worked at Deloitte for 6 years stateside in public accounting. He mentioned that BESIDES the quarterly reviews that are done throughout the year, the audit team will usually start their process in early December for a fiscal 12/31 filer. I assume this process would have been started even earlier for CCME, considering the Chinese New Year holiday in February. He also said that the possibility of faking CCME's reported cash flow and B/S cash would be nearly impossible. Cash trails are thoroughly vetted and scrutinized throughout the audit. I also want to note that on the last conference call, Jacky Lam revealed that DTT worked closely with CCME on all of their quarterly filings, and that DTT had staff within CCME headquarters for most of the period.

So my conclusion? Mr. short got in over his head with CCME- beginning this summer when the stock touched $8. As the stock steadily climbed to $23, so did the short interest at over 50% of the float. Day 13 of Reg SHO and forced delivery was now fast approaching (Feb 3rd), and Mr. Short remembered vividly what happened last time Reg SHO came around. So Mr. Short realizes there is a foolproof way to bring the share price down. Hire Citron and Muddy Waters to drum up some ammo for a Bear Raid, preying on unsophisticated investors who have done little real due diligence on CCME by claiming that another small cap Chinese reverse merger with financials that seem almost too good to be true- is a fraud! Brilliant. Mr. Short turned a potential $100M loss into a $150M profit in 3 trading days! And it all coincided perfectly with the Chinese New Year, day 13 Reg SHO, 3 weeks before earnings, new 2011 guidance , and a fully audited 10-k by arguably the most reputable accounting firm in the world, Deloitte.

I almost wish I was smart enough to think of this myself.
Hedge funds are slicker than deer guts on a door knob. This is their favorite style of trading. Quick and dirty. CCME has a low enough float to easily manipulate, yet market cap is big enough to make a real bet. The stock is also sufficiently liquid, with a very active option chain. If only we could view short sale ownership data (this is being considered in Europe) we could get serious insight to who has been manipulating the stock. MW, Citron, and the many hedge funds that profit from this type of trade may eventually feel the pain, just as many long investors have this past week. However, I think the institutional shorts who orchestrated the Bear Raid have likely already covered and could potentially be on the long side of the trade now.

I believe there has been WAY too much investigative work and due diligence on CCME to throw in the towel here.
Every single new short piece gets shot down in a matter of hours, which I believe further vindicates the CCME story. Check out WCTBills truly value add investigative work that refutes MW,Citron, and other bloggers on Seeking Alpha: ccme-info.xanga.com/



Disclosure: I am long OTCPK:CCME.
Stocks: CCME