Fab Universal (NYSE:FAB) announced that the very famous investor Jim Rogers long beloved by Financial TV has joined the Board of Directors. Fab is a small cap trading under $5. They are in the digital media space in China and creating lots of cash flow. So why would Jim Rogers accept a seat on the Board. He is rich and another buck may not be as exciting as it used to be. If he truly believes in the potential and no one doubts his integrity why not just buy a lot of shares, let the market know you are long and wait to cash in.
The Chinese market is seductive and enigmatic. Digital is a real play for the future. Jim Rogers is long recognized as an astute commodities investor and China is a huge commodities buyer. So he gets into China with a digital play. Google (Nasdaq:GOOG) has difficulties in China. Yahoo (Nasdaq:YHOO) has stubbed its toe in China and is still not sure if it was cheated outright or just diddled a little in the back seat of puppy love. But someone with deep pocketed books will most likely appreciate all the heavy lifting that`s been done and open up the cheque book. Amazon (Nasdaq:AMZN) Netflix (Nasdaq:NFLX) Facebook (Nasdaq:FB) are all looking for big bold plays and think nothing of billion dollar acquisitions. So on a current market cap of $72 million the numbers will work out rather well.
The communist party is still totalitarian if it got pushed strongly enough. But the China market is huge and enticing.
Fab Universal is still readily unknown. The Wall Street Journal at time of writing still says no news on Fab for the past two years. So this is what I think Jim Rogers is up to as he swings for the fences.
Buy in and arrange some preferably financing.
Expand services and get yourself on the map. Annual revenues are just in the tens of millions. With a compelling product and enough working capital the China market can be very kind to shareholders.
So as you are expanding and growing and creating cash flow and profits you will attract the attention of the big dogs who will want to buy a growing concern in the China Market. That’s when the take-over offer is made at huge multiples and Jim Rogers cashes in yet again. So far so good. I can just see investors hit the buy button very hard.
Oh look here comes the Black Swan. We may have to wring its neck. The China market is not a private property driven liberal democracy with enshrined rights of ownership. They play by their rules which they make up as time goes on. Fab Universal will need to keep the Chinese political and economic power élite engaged, warm and fuzzy. If Beijing decides it wants to crown another king it will do so. The Chinese consumer will be switched over to other choices and forget about Fab.
The risk is political. We are speaking about media which politicians will watch over carefully. If Jim Rogers understands the China Market he needs to ensure the political factors are well ties down and stay in favourable trends as time goes on.
George Gutowski writes from a caveat emptor perspective.
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Reed Hastings CEO of Netflix (Nasdaq:NFLX) has skipped a post or two on his Facebook (Nasdaq:FB) page. Recently he got into some regulatory hot water by praising some key marketing types for reaching a milestone in number of users. The milestone while impressive was widely expected and came as no big surprise. Reg FD Nazi’s maintain he did not issue an olde school press release therefore it was insider. The regulator is now grappling with the pervasiveness of social media.
So it was kind of cute that when Reed Hastings got a very nice increase in salary he did not post it on his Facebook page. So if anyone missed it here is the new deal:
“On December 29, 1012 it was revealed in an SEC filing that Netflix will substantially increase CEO Reed Hasting’s paycheck in 2013. Hastings will receive cash and stock options of $2 million each, up from $1.5 million in options and a $500,000 cash portion in 2012, resulting in the largest cash payment Hastings has ever received.”
Not only did they slip this tid bit out during the Christmas holidays they released it on a Saturday just before New Years Eve when even high frequency trading starts to take a break.
Happy New Year Reed Hastings. Who covered the champagne!
George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti as well as his evil twin brother who is writing a Wall St murder thriller at twitter@georgegutowski
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Netflix (Nasdaq:NFLX) has a leadership team with very little skin in the game. CEO Reed Hastings salary doesn’t depend on Netflix’s business performance. Netflix has taken the unusual move of granting its named executive officers only fully vested stock options. Who runs the compensation committee?
Reed Hastings makes $500K per annum. His stock options were cut back in 2011 but he made $43 million that year by exercising 190,500 of stock options earned in times past. He and his henchmen probably do not have fire in the belly.
The stock is around a 34 trailing PE and has a short interest of 28.87% of the public float. Money flow is an anemic 1.04.
It looks like the boys do not have their eye on the ball.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti
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Microsoft (MSFT) stunk up the joint today with a double-barreled press release.
Firstly, their board elected Reed Hastings, founder, chairman and CEO of Netflix Inc.,as the lead independent director. Netflix is revolutionizing the movie business. Where will this guy’s heart and mind be as he tries to be independent on Microsoft issues? Not a good fit as a board member in the first place. Just remember how well Eric Schmidt from Google (GOOG) worked out on the Apple (AAPL) board. Time bomb ticks very loudly.
Secondly, the board will no longer use a wire service to disseminate financial information. They will now use an RSS feed from the investors relations component to their website. This will disadvantage the concept of wide dissemination. You have to be digitally tracking. The entire manner of explaining information to the market place is quickly changing. Investors will most likely not benefit.
Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.
Best Buy (BBY) announces its connectivity strategy along side a near doubling of EPS. Sounds good. Very good in fact. Conspicuous by its absence is any discussion of on-line downloads a la Netflix (NFLX) or iTunes (AAPL). You have the consumer at the initial moment of trust when he/she lays out large wads of cash to buy some expensive gear. If the consumer is going to use connectivity it makes sense the same consumer will consume media on-line. Why lose the relationship?
Brian Dunn, CEO of Best Buy says they are still in the early stages of the strategy. Lots of ways the comment may be interpreted.
Let’s see Netflix (NFLX) has a market cap of some $7.7 Billion. Best Buy (BBY) market cap is roughly twice that at $14.4 billion. M&A seems unlikely. Strategic Alliances seem more likely. But executives do not even discuss the possibility.
Disclosure: No position in stocks mentioned in this post.