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No. of Recommendations: 8
Hi whoamifoolin

So then is it correct that YONG management has 3 to 4 tools to squeeze shareholders to take 6.60.

(1) sandbag the expenses, dragging down EPS & EPS growth to trigger a (i)lower P/E multiple on (ii)lower earnings ( double jeopardy already it seems)


They could do some more of this. Given that they want to ultimately own the company, they don't want to do anything to harm the company in the long term, so hopefully that provides a little bit of a check on how far they can go pushing up spending.

(2) Ensure future triggering of the MS payout & dilute the shares and so reduce the Net Present Value of existing shares further ?

I guess they could, but I would put the likelihood of the company intentionally doing this as very low

(3) Continue to accumulate unrecognized earnings to further reduce reported earnings (in effect maximising the payment cycle)

Given that the auditors will complete their audit before Q4 is released, I think they would prevent the company from doing anything too outrageous when it comes to not recording revenue that they should have.


All of this may be a moot point given that I would be surprised if the Special Committee doesn't make a decision on the offer before Q4 is announced in March. I would guess that they want to make a decision before the end of December as I doubt the Special Committee members want to be dealing with this for an extended number of months. They will get their input from Houlihan and either the numbers work in their minds or they don't. I find it hard to believe that they could receive a fairness opinion at $6.60 but who knows.

My gut tells me that the offer will be increased a little (hopefully a few dollars) and then the Special Committee will accept sometime in December. If they require a shareholder vote the proxy would probably go out in January and the votes would come in during February and March. The vote could be interesting given how vocal many minority shareholders have been and how many of us have been accumulating even more shares since the offer was announced. If the shareholders vote against the offer, would Wu and MS increase the offer enough to try again?

If not, one of the risks to shareholders is how pissed will Wu be that he didn't get the significant easy payday here. How will it impact his running of the company going forward? Would he possibly leave the company, which would automatically trigger a default on the MS Preferred deal? Will a class action suit against the company get any shareholders any additional payout?

I'm actually somewhat giddy with curiosity wondering how this will all play out.
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