Thoughts on the Charter / Time Warner merger

The CHTR / TWC merger is mostly about rolling up and turning around poorly-managed cable assets.  The bet is on Tom Rutledge (Charter’s current CEO) being able to turnaround poorly-run cable assets.  Ideally, he will get the productivity of the assets similar to or higher than Cablevision, his former employer.  For a deeper dive, see my post on “Malone’s cable strategy“.


I think that it is likely that Charter is much better off with the merger than without it.  Its shares trade at a premium valuation (relative to TWC), presumably because the market recognizes that Tom Rutledge can squeeze a lot of extra productivity out of cable assets.  Charter shareholders benefit if its shares are used to acquire companies with relatively less expensive shares.

As well, the turnaround game works best when the company consists mainly of poorly-run assets.  Post-turnaround, there is little room for value creation.  Constant takeovers are good for Charter because it dilutes Charter’s ownership of mature post-turnaround assets.

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Web sleuthing – Part 2 – allows you to look at old snapshots of websites.  It’s a very powerful tool and free to use.  This can be useful to try to figure out the ownership history of a company, subsidiary, or a website.  Websites generally contain “about us” pages and contact information such as email addresses. can also be useful to look at how a company’s strategy has changed over time.  For example, I noticed that Coach (COH) no longer offers handbags with very large logos (the extremely large C monogram, the large horse carriage logo, etc.).

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Web sleuthing – Part 1 – Domain registration records

Generally, key executive officers and insiders of a publicly-traded company do not register their company’s domain.  They let an IT person or web designer handle the task.  Domain registration records tend to be a reflection of what the lower-level employee thinks who actually owns a particular domain name.

Looking at domain registration records can potentially be a useful tool for detecting frauds.  Insiders may be lying about the ownership of a particular company or subsidiary.  Fraudsters may unintentionally fail to cover their tracks because many people do not realize that domain registration records are public.  The domain registration records may tell a different story than a company’s SEC filings.  That is why I look.

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The BCSC / Jon Carnes drama and its implications

A British Columbia Securities Commission (BCSC) panel dismissed fraud allegations against Jon Richard Carnes.

While Carnes theoretically won, the panel’s written decision was very biased against short sellers.  Firstly, the BCSC failed to realize that they went after the wrong people (this is a pattern that repeats through history with many regulators… it’s nothing new).  However, the panel did not see value in creating an environment where people can expose fraud without fear of repercussions and nasty legal bills from regulators.

More importantly, one of Carnes’ researchers (Huang Kun) was wrongfully imprisoned in a Chinese jail and suffered abuse while detained.  Money is one thing.  Having your human rights violated is another.  I believe that Carnes’ lawyer(s) presented newspaper articles that describe Kun’s story.  Exhibit EX00344 (a BCSC webpage lists the hundreds of exhibits filed) seems to be a Globe and Mail article that describes what happened to Huang Kun in China.  The panel’s written decision does not seem to mention Huang Kun at all.  His name does not appear in the decision anywhere.  I am very disturbed at what appears to be the panel white washing the abuses that have occurred.

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CBPO – What their joint venture partner is saying

CBPO’s Shandong Taibang subsidiary is 82.76% owned by CBPO (image).  I believe that the rest is partially or wholly owned by the “Shandong Institute of biological products” (山东省生物制品研究所).  The Institute’s website seems to say that their joint venture with CBPO has projected revenues of $900M annually (Renminbi) and projected income of $17.24M annually.  This works out to an income margin of shows that CBPO’s net income margin for YE2013 was 26.85%.  The discrepancy seems large.


(*EDIT 5/8/2015: Changed the net income margin number from 2014 to 2013.)

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