What Is Wrong With AirMedia Group Inc (ADR)(NASDAQ:AMCN)?

The Rosen Law Firm confirmed that it is probing potential securities charges on behalf of investors of AirMedia Group Inc (ADR)(NASDAQ:AMCN). The probe is related to the allegations that the company may have released materially misguiding business information to the investors.

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Last week, ‘Seeking Alpha’ released a report, which states that the publicized investment by Shenzhen Liantronics into the company is nothing but a sham transaction, indicating that it is not what it claims to be. On the news, the shares of AMCN declined sharply in yesterday’s trading session. The global firm is preparing a case to recover losses suffered by investors of AirMedia.

The details

As per the report, AirMedia Group Inc (ADR)(NASDAQ:AMCN) share price has almost doubled in the past few weeks after the company announced an investment by Shenzhen Liantronics. It didn’t release the details of actual contract but did issue a PR stating $500 million valuation.

However, the actual contract states that there is no binding agreement and Liantronics has not even performed due diligence. The report mentions that AirMedia share price should go back to the levels of $2 from where it started its upward trend.

The facts

The report of Seeking Alpha stated that institutional ownership of the company is just 8.6%. The sharp gain in the stock price was just directed by the news and there was no analysis or reference on any terms of the claimed deal.

The price was pushed up by retail day trader sites including pennystocksuperstar.com, mediasentiment.com and few others. The deal is unlikely to materialize due to unrealistic clauses mentioned in the contract. The clauses were considered so as to protect Liantronics, and it has even made sure that it gets the choice to back out of the claimed transaction by including a “put option.” The decline on Friday came after the company released its annual report.

Culver Stinson

Culver Stinson

Stinson is US Markets Daily’s Senior Producer for News & Public Affairs.