I copied the Hartcourt Special Memo to market analysts from their website last night and laughed out loud.
Briefly, the here-to-fore incompetent management has craftily negotiated a contract to purchase 90% of a Chinese Joint Venture guaranteed(!!!) to be worth $80,000,000 for a mere $30M. The money (several times the market value of HRCT) will be easily raised as there have been preliminary discussions with two investment bankers.
Although there are currently 100,000 subscribers, China should be cutting many "red tapes" soon resulting in 1M subscribers at the end of 2001. Also, the company, China Infohighway Communications, plans to enter E-commerce in a big way, selling 250,000 chinese specialty products worldwide on the Net in six months, IF THEY CAN RAISE SOME MONEY.
What is the value of this company? Using conservative assumptions such as more Chinese internet subscribers than in the U.S. or Europe in 5-6 years, with each subscriber valued at $6ooo (several times the per capita GNP), the company should be quite profitable.
Q. Why is HRCT able to enter China ISP market when others have failed?
A. "It is too complicated to explain..."
Shareholder benefits? The current assets of HRCT (such as ECS, a formerly successful company which the former owner and HRCT boardmember apparently cannot repurchase due to debt levels and loss in value of his HRCT stock) will be called Enova (ironically, the Chinese pronunciation of 'enema'). The Chinese contract (which is already rumored to have been disavowed) and $30M debt will assume the Hartcourt name. And the management shuffle will continue with new CEOs for both companies along with new board members.
Summary: It's the chance of a lifetime, sell the children and mortgage the house.
Disclosure: Amazingly, I own this piece of work. I list it under the Quicken category of 'entertainment', not 'investment'. |
