China MediaExpress Converts Bull to Bear
NEW YORK (TheStreet) -- The Nasdaq Stock Market delisted the shares of China MediaExpress (CCME) Thursday, ending a prolonged, nine-week trading halt spurred by allegations of massive fraud at the small-cap Chinese advertising firm.
It also brought to light some painful lessons for investors who believed in the company.
With the stock banished to the over-the-counter Pink Sheets, trading in the name began Thursday morning for the first time since March 11. Before the suspension, China Media's shares last changed hands at $11.83, good for a stock-market value of $437 million. But even that was a far cry from the nearly $1 billion in market cap that the company commanded as of early January, before a series of public short-seller reports emerged, accusing China MediaExpress, which purports to sell advertising on flat-screen TVs installed on busses in China, of faking its financial results in order to steal money from U.S. investors.
The company's shares opened Thursday at $4.55 and declined from there. Volume was frantic as short sellers rushed to cover their positions and book profits, and long investors rushed to unload their stock and limit their losses. By Thursday afternoon, China Media's shares closed at $2.16. Volume surpassed more than 14 million shares, meaning that more than a third of the company's shares outstanding had turned over.More than half the company's float had been sold short by investors who were betting that the company was mostly a fiction, and thus worthless. The other half of those shares were held chiefly by small, retail investors with long positions -- hopeful investors like Marty Lopez, a 30-year-old schoolteacher in Baltimore, who'd taken about $28,000 from his savings and put it into CCME stock, hoping to cash in on a business model that he believed was "amazing. It seemed like a gold mine." No longer. "We dumped it," Lopez said in a phone interview Thursday afternoon. His broker was able to sell his stake for $3.05 a share, he said, a better price than he was expecting. "I'm happy to pull three thousand dollars out of the whole debacle," he said. "But you can quote me: This sucks."
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