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Chou Funds 13-F


Parsad
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I'm not the least bit dumbfounded by Francis Chou's investment, who I greatly respect & admire.

Here is why I think he holds Qiao Xing Mobile:

 

The Explosion of Mobile Video

 

By QUENTIN HARDY

| February 14,

 

Mobile video is coming on stronger.

 

Cisco just released its annual five-year forecast for mobile data traffic, which projects that by 2016 mobile data will amount to 130 exabytes annually, 18 times current levels. That data figure is roughly the amount of data on 33 billion DVDs, or 813 quadrillion text messages

 

http://bits.blogs.nytimes.com/2012/02/14/the-explosion-of-mobile-video/

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The Chairman of the board of QXM (Qiao Xing Mobile) is Zhi Yang Wu. His father, Mr. Rui Lin Wu, is the vice chairman.

 

Mr. Wu, the father, also founded XING, which is the majority owner of QXM (owns 60%). Currently he is the Chairman and CEO of XING. XING tried for a very long time to buyout QXM, unsuccessfully.

 

XING, Qiao Xing Universal Resources is the name, was founded in 1992 and went public in '99. It was named Qiao Xing Universal Telephone Inc until January 2010, when it changed it's name after they acquired a copper-molybdenum mining company from one of Mr. Wu's private fully owned and controlled companies. Mr. Wu, with no previous mining experience, bought 3 mines in the late 2000's through his private companies and sold all of them off in a few years, including the one to XING. Since the transaction XING's stock has lost over 70%.

 

With this new focus on mining he founded Real Gold Mining, a gold producer listed in the Hong Kong markets. He remains the controlling shareholder to this day, although he has no position in the managing of Real Gold. Real Gold IPO'd in 2009. They have averaged one CEO resignation per year.

 

In May 2011, it was discovered that Mr. Wu inappropriately pledged all of Real Gold's assets as collateral for a personal loan for some of his wholly owned private companies. Although he wasn't a director or manager of Real Gold, he was/is the majority shareholder and at the time he was also a director, actually the sole director, of one of Real Gold's wholly owned subsidiaries, Lita Investments. Wu arranged a 240 million yuan (US$37 million) borrowing facility with Shanghai Pudong Development Bank for four private companies that are part of his Cosun telecommunications-to-mining private conglomerate. Wu signed a similar pledge with the bank for a 100 million yuan borrowing facility in September 2009. Real Gold's management say they had no knowledge that Wu was doing this at the time.

 

Real Gold stock has been halted since May of last year. http://finance.yahoo.com/echarts?s=0246.HK+Interactive#symbol=0246.hk;range=1y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 

In October, Real Gold's auditor, Delloitte, resigned citing the company's inability to disclose some material information. In August, Real Gold's independant director who was leading the internal investigation resigned over disagreements with the board. http://www.businessweek.com/news/2011-10-13/real-gold-mining-says-deloitte-resigns-as-auditor-over-omissions.html

 

Here's a link to the Real Gold/Wu story. http://chinaminingblog.com/2011/06/real-gold-assets-used-to-secure-directors-personal-loan/

 

Wu has had other shady insider dealings between his private companies and publicly listed stocks, including a company named Prod-ART, Ankson, and SEEC Media Group that I'll omit for brevity.

 

 

I wish Mr. Chou and his fund's investors the best of luck in their partnership with QXM's majority shareholder, the Wu's and XING. Hopefully it turns out better for Chou than it did for the minority shareholders in Wu's other public companies.

 

 

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  • 2 weeks later...

I read the RSH conference call and it was a difficult quarter/year to say the least.  I know Francis loves his retailers, but given that RSH has leveraged up their Target relationship at the expense of their own retail, it is hard for me to see the value.  RSH stores have always been dogs in my neck of the woods, but I guess they are/were good for selling low-credit phones via Sprint.  Once Sprint tightened their credit standards, boom, there went the business model.  Add in that they can not add much to supplemental buys at their Target kiosks with iPhones and other carriers, whats left?  However, if it gets much cheaper, than its worth a closer dive down look.

 

Cheers

JEast

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