In March 2006, Weiqiang Jiang, the father of Jason Nanchun Jiang (the CEO/controller of Focus Media), provided a short-term loan to the Group of approximately $2.5 million to relieve a temporary shortage of Renminbi the Group experienced at that time. The loan is unsecured and was provided to us at no interest. The loan will become due and payable in full on June 30, 2006.
The key words here are "relieve a temporary shortage of Renminbi the group experienced".
Approximately two months prior there was a capital raise which raised $295 million. Of that $62 million went to the company and $220 million went to selling shareholders. The remaining $13 million went to the underwriters.*
A looming "shortage of Renmimbi" looks like material information that should be disclosed in a prospectus.
Well it wasn't. Indeed the prospectus made clear that the company had plenty of Renmimbi liquidity but might be short US dollar liquidity to pay dividends of the like.
Without a better explanation (which I have sought) I would think there may be material non-disclosure.
So who were the selling shareholders?
It is interesting to me when $220 million in stock is possibly sold on material non-disclosures. I want to know who the sellers were.
One of the biggest (but not the biggest) selling shareholder was JJ Media Investment Holdings - the vehicle of Jason Jiang, CEO/Controller of Focus Media.
Most of the other selling shareholders were prior shareholders of Target Media which was sold to Focus Media mostly for stock. Those sellers were not insiders so they can't be held responsible for material non-disclosure in the prospectus. Nonetheless it is amusing selling shareholders included both Carlyle and CDH who are now wanting to take Focus Media private.
One last selling shareholder amuses me. It is Neil Nanpeng Shen. He is better known as the managing partner of Sequoia Capital China - but in this context he should be known as the Chairman of the Audit Committee for Focus Media.
Is it possible that the Managing Partner of Sequoia Capital China sold personal shares in a company in which he was the chair of the audit committee and where the prospectus may have contained material non-disclosures?
I am sure there must be an alternative explanation - and I have written to Focus Media to ask them to explain the source of the Renminbi shortage disclosed above. I have received no reply. I am hoping for one soon and I will publish it when received.
The underwriting fee
The underwriting fee was about $13 million. The lead banker was Goldman Sachs. But you knew that anyway.
*All amounts rounded to the nearest million.