VisionChina Shareholders Ask Board of Directors to Replace Chairman Liming Li

2011-11-16 23:41 1328

In Letter to Board, Cite Consistent Mismanagement, Plummeting Stock Price, Inability to Execute

PALO ALTO, Calif., Nov. 16, 2011 /PRNewswire-Asia/ -- Oak Investment Partners and Gobi Partners, major shareholders of VisionChina (Nasdaq: VISN), today sent the following letter to the Board of Directors of VisionChina:

Dear VisionChina Board of Directors:

As you know, we are each major shareholders of VisionChina, having received VISN shares as a result of VisionChina's January 2010 acquisition of DMG. We are gravely concerned about the future of this company and believe that the board of directors needs to make major changes both in its direction and management, including the replacement of Chairman Li.

It is our opinion that Chairman Li has consistently mismanaged the company in recent years. For example:

  • In mid-2008, VisionChina bought six smaller advertising companies, structuring the deals based on "earnouts," which resulted in an $89.1 million impairment write-down in July 2010.
  • After acquiring the DMG subway advertising business, VisionChina inexplicably fired most of the key sales team and failed to devote the resources needed to successfully operate that business, resulting in a botched post-merger integration.
  • Since Scott Chen's resignation as CFO in August 2010, Mr. Li has not hired a CFO for a period that has now been 15 months. There is no one else on the management team at VisionChina who has enough professional experience to stand up and question these poor decisions.
  • Under Mr. Li's stewardship, VisionChina's share price has plummeted from $22.38 on August 1, 2008 to $1.52 on November 11, 2011.

Our own direct experience with Mr. Li since the DMG acquisition provides further insight into how badly VisionChina is being run today.

As you know, our companies, Oak Investment Partners and Gobi Partners (Oak and Gobi), sued VisionChina for willfully reneging on the first of two $30 million payments (after making its initial $100 million payment) in connection with VisionChina's $160 million acquisition of Digital Media Group Company Limited (DMG) in 2009. VisionChina filed a lawsuit against for fraud and sought to defend against Oak and Gobi's affirmative claims for payment based on the same purported fraud. (It is our belief that from the start, Mr. Li's goal has been to simply avoid or delay paying the additional $60 million in purchase price he agreed to pay the DMG shareholders at the time of the acquisition.)

On November 4th, after 11 months' time, the New York State Supreme Court dismissed all fraud charges against Oak and Gobi, writing: " is plain that VisionChina is not able to maintain a viable cause of action for fraud (against Oak and Gobi)." We believe this ruling validates our assertion that VisionChina's lawsuit was of no benefit to the company or its shareholders. To the contrary, we believe the facts will show that VisionChina's lawsuit resulted in vast amounts of wasted time, energy and money that VisionChina management should have been spending to build the business.

The court also granted the DMG shareholders' motion to attach $30 million of VisionChina's assets because we "have demonstrated that it is more likely than not [the DMG shareholders] will succeed on the merit of [their] claims." The final $30 million payment is due on November 16, 2011, and assuming VisionChina fails to pay that as well, we will ask the court to expand the attachment of VisionChina's assets to include that amount. Our total damages exceed $90 million and we intend to ask the court for an award consistent with that figure.

We want to be clear: Our request that the Board replace Chairman Li is not being made because we are angry that he failed to honor the company's agreement with us with respect to its acquisition of DMG or, because we believe he filed what has been shown to be a frivolous lawsuit against our companies. Rather it is being made because as shareholders, we believe mismanagement of the company, as detailed above, has become endemic to the company under his leadership. Mr. Li's actions with respect to the DMG acquisition are but one example.

We strongly believe that VisionChina has a very solid core business with a terrific foundation in the key Tier-1 Chinese subway and bus-based advertising markets upon which to build an exciting high-growth business. That's the vision for the combined company we believed in when we agreed to sell DMG to VisionChina several years ago and to take a substantial amount of VisionChina stock as part of the purchase consideration. That vision has gone largely unrealized in the last two years because of VisionChina's inability to execute on that vision, even during this time of robust growth in the China advertising market. Right now, it is manifestly obvious that the market no longer believes in Mr. Li's leadership of this company – the VISN stock price is trading, and has been trading for many months, at a level so low compared to its revenues that it clearly shows that investors have all but given up on this management team.

It is now time for the VisionChina board to step up and find new management for this company, starting with Chairman Li. We as shareholders of VisionChina believe that you must exercise your fiduciary duties as a board of directors to prevent the company and its shareholders from suffering further damage.

We look forward to hearing from you soon.


Ren Riley Thomas G. Tsao  
Oak Investment Partners XII, L.P. Gobi Partners, Inc.  

This letter was sent to:

Liming Li, Chairman
William Decker, Director
Yanqing Liang, Director
Yunli Lou, Director
Kit Leong Low, Director
Xisong Tan, Director

Source: Oak Investment Partners