How AirMedia Group Is Destroying Shareholder Value - The Epilogue
Aug. 6, 2018 3:23 PM ET
Kok Lo
Summary
Share price has fallen further from around $1.50 in June 2017 to below $0.50, another two-thirds on top of the earlier 90% drop from the IPO price.
The Chairman’s $6 going private offer was extended and reduced to $4.10, and even this was ultimately aborted, with no break penalty imposed on the offeror.
The Company is now in danger of being delisted due to failure to submit accounts on time and a share price below the minimum for continued NASDAQ listing.
In May this year, Chairman announced a $5 million share buyback proposal, but no action so far.
Next course of action? Lesson learned, move on.
When I wrote the last of my series of posts on AirMedia (NASDAQ:AMCN) back in June 2017, I thought that's it with the trail of destruction, having wiped out 90% of the IPO share price and left with a pile of money losing businesses. How much more damage can management inflict on the company and shareholder value? Boy, was I wrong. The share price plunged another two-thirds in value to a new all-time low below 50 cents and is now in danger of being delisted. In addition, it is late in the filing of accounts, and management is practically incommunicado, so shareholders have no idea whether the company is dead or alive.
The question in my mind is, how did management get away with all this till now? Some of the answers can be found in the Netflix documentary film The China Hustle, which I just finished watching: because they can.
It may come as a surprise to investors of foreign-listed Chinese companies that as mentioned in the movie, it is not a crime in China itself to defraud investors overseas, thus passing the buck to the foreign regulatory bodies. The bulk of the shareholders of the Company are Chinese retailers who are not familiar with the US legal and listing frameworks that are supposedly for their protection. I have some dealings with class action lawyers in the past, being class plaintiffs in a number of such cases against Chinese companies and their management. The first requirement to be a lead plaintiff is to have sufficient financial interest in the case to make it worth their time and effort to pursue what may well be an exercise in futility. This leaves mainly institutional investors, but the Company is under their radar most of the time, with no research analyst's coverage to speak of. It is also too small to attract the attention of short sellers such as Muddy Waters Research or Alfred Little. Fund managers with any experience would have smelled a rat and bailed out long ago instead of riding it all the way down. Even when the $6 offer was still outstanding, the share price was at a huge discount, indicating that investors already predicted that it is a sham offer or the risk arbitrageurs would have closed the gap. So, who is there to initiate action against the Company and management as a deterrent?