You On Demand, the “Chinese Netflix”

Short % of float: 5.4%
Cost of borrow: around 6%
Market cap: $91M

This stock is the intersection of:

  • Stock promotion.
  • China.
  • Fake wrestling (World Wrestling Entertainment).

You On Demand is a colorful company formerly run by Shane McMahon, the son of World Wrestling Entertainment’s CEO and chairman.  According to his Wikipedia page, he was a WWE referee from the age of 19 to 28.  From 28 to 40, he was a professional wrestler.  Outside of the ring, he hasn’t had as much success running You On Demand as the company has a history of GAAP losses.  He became the company’s CEO on July 30, 2010 and stepped aside on July 12, 2013.  He currently serves as the chairman.  You On Demand’s current CEO is Weicheng Liu.

Stock promotion

The YOD webpage has a investor news page that has lists of press releases that the company has issued.

YOD-investor-news

I find it interesting that YOD decided to highlight the following stock promotion websites that have said good things about YOD:

  • Five Star Equities
  • TrendingWallStreet.com
  • BullTrends.com

I went to Five Star Equities and downloaded their report on YOD.  One of the disclosures in the YOD report was the following:

Five Star / Providence receives compensation from third party organizations for advertising services provided in the form
of email newsletters. Five Star / Providence and its affiliates, officers, directors and agents have been compensated for
featured company coverage and therefore information should not be construed as unbiased.

To be fair, the disclosure doesn’t seem to reference YOD directly.  It is unclear to me whether or not YOD paid Five Star for “featured company coverage”.  However, Five Star is clearly in the business of paid stock promotion and they happen to be based in an offshore country (St. Kitts and Nevis).  It is strange that YOD thinks that it is a good idea to highlight positive coverage from such a company.  Not surprisingly, the company decided to issue those particular news releases on Accesswire, which is not a major newswire service like PR Newswire.

Do your own research

The 10-K is pretty interesting (for a 10-K):

  • There are related party transactions.
  • There is a $473k loss on an “uncollectible shareholder loan and related party loan”.
  • There are material weaknesses in the company’s internal controls.
  • There are warrants at a $150.00 exercise price (on a split-adjusted basis).  The current share price is $5.79, so the strike price is roughly 26 times the current share price.  The price history of this stock is interesting (Yahoo Finance has a chart).

If you are interested in this stock, I would encourage you to do your own research.

*Disclosure: Short YOD.  So far this stock has elbow dropped me and put me into an inverted facelock neckbreaker.

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10 thoughts on “You On Demand, the “Chinese Netflix”

  1. Hi Glenn – I’m enjoying your blog. Met McMahon at a conference last year – they also promote the company themselves on the conference circuit. Given low mkt cap it is a dangerous short. Shoot me an email if you’d like to discuss.

    • So Jacob – looks like Glenn made a accurate call to short this turd of a company. Total junk scam company fleecing retail investors that don’t do their DD. By the way, I’d love to see their working mobile app because I can’t find it in the App Store. Maybe you can post a link?

      • There’s no need to attack Jacob. He was just saying that it is dangerous to short companies with low market caps even if you are right about the stock dropping a lot.

        Thanks for the comment though. Unfortuantely I didn’t really make much money on this stock because I shorted it early before the price run-up. Combined with the very expensive borrow, I’m more or less break-even. (I covered a while back and have no position in it. I don’t think I will short it again.)

  2. Of course low caps swing wildly and can burn you fast, but if you had the capital and stuck with the short position, you would have made a nice healthy profit. The run up was pure manipulation and the analyst covering this is a total Scammer that works for Chardan Capital. They have a vested interest to increase the PT from $6 to $10 and that’s what caused the PPS pop. Chardan has thousands of shares and the owner of Chardan personally has 200K shares. Pure manipulation and the analyst doesn’t disclose this when he makes his PT press releases on Barron’s.

    This is all part of the SPAC garbage stock that is getting dumped on Wall Street and retail investors end up being the bag holders.

    • Hi Mike,

      I believe YOD was formed through a reverse merger, not a SPAC. When I met the company in early 2013 it was trading at <$1.50/share and management was making some very questionable claims about their distribution rights in China. Nevertheless they were claims that were both difficult to disprove and valuable in theory. While I was and remain quite skeptical, I also concluded that it would be unwise to bet on an already tiny capitalization getting any tinier, barring some sort of liquidity event. In retrospect, shorting YOD in March would have been fortuitous timing, but shorting it a year earlier and sticking with it would have been folly. Timing is hard. I think YOD is probably ultimately worthless, but I still have no position. They have enough cash to keep looking for new gullible investors for quite some time.

      • Can’t blame you guys for your thoughts during the timing of your posts but it seems YOD is really turning things around as they have made monumental gains and moves since then. Company is positioned very well for success.

      • The borrow is 71%, so I haven’t been following it lately.

        I hope you really understand what you’re doing if you are long or short.

  3. Ha.. right, monumental gains. This company is junk. By the way Glenn, the SPAC is used for a reverse merger. I’ve done more research on Chardan Capital and Kerry Propper than you even know about. The SPAC was originally formed in California and then transferred to Nevada. Kerry Propper and business parter who happens to be the brother of the CFO and President are the ones running this scam. Bunch of crooks.

  4. Go look into all the companies that Kerry Propper has been involved with and you can see the guy is a crook and belongs in jail. He uses his analyst to pump stocks i.e. Jay Srivatsa the only analyst covering this stock pumped the price and had a PT of $10 on it last year. Yeah, like it ever hit $10. Jaguar Acquisition Corp was part of the SPAC reverse merger that began all this Netflix of China BS that has now become YOD. There have been de-listings of many SPACs that Kerry Propper has touched. http://www.bloomberg.com/research/stocks/private/person.asp?personId=9316930&privcapId=204864822

    http://seekingalpha.com/article/299068-17-reasons-not-to-take-chardans-wavering-opinion-on-zhongpin-seriously

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