JerryD

Does China Finance Online Have a Growth Plan? (JRJC 3Q05 Conf Call Quotes)

Notable events since JRJ went public:

CEO left the company
COO left the company
Declining subscriptions
Declining average selling fees

So, what does the company do with all of its cash generated from its IPO? It proclaims that it's stock is undervalued and spends $10 million on a stock buyback program. The other thing the company does is increase spending on a marketing campaign. This marketing campaign does not help reverse their declining subscriptions. However, it increases network traffic to their site, which in turn generates more advertising revenue. Management seems very excited by this phenomenon and states that they are "putting a lot of effort in this direction". They state that revenue from advertising may be a major growth factor in the future.

In other words, less than a year after their IPO, they spend cash buying back stock that helps support an artificially high market cap. During that time, their only growth strategy that works is to increase spending on marketing to generate higher website traffic that increases their advertising revenue. These two business activities are tantamount to deciding to eat one's self in order to avoid starvation.

Simply put, the company should never have gone public. Management does not have a viable business plan yet and their spending is unsustainable.