I am becoming obsessed by the disclosures about the businesses Focus Media disposed of in 2009. The full disclosure is in this post - and an explanation as to why Focus Media's accounting must be wrong is in this post.
But to summarize - Focus Media disposed of seven businesses in 2009.
All businesses were disposed of at a loss.
Six of these businesses were given away for no consideration at all. In one consideration of a low single digit number of millions of dollars was paid.
A majority of these businesses were given back to their original owners.
A majority of these businesses are in British Virgin Islands subsidiaries.
And the accounting for these transactions is messed up.
That said, the cash flow statement from the latest 20F provides more information.
Here is a section from the cash flow statement:
Purchase of equipment
Cash of disposed subsidiary
Proceeds from sale of a subsidiary
Purchase of subsidiaries and earn-out payment paid to acquire subsidiaries, net of cash acquired
Investment in an equity method investee
Deposit refunded to acquire subsidiaries
Proceeds from disposal of fixed assets
Increase in restricted cash
Cash paid for short-term investments
Sale of short-term investments
Net cash used in investing activities
I want you to notice the highlighted line...
In those susbsidiaries disposed of in 2009 there was embedded 27,315,949 dollars in cash.
These subsidiaries were given away.
If you interpret the accounts literally this company has been giving away cash.
I have a handful of explanations for this behaviour but plausibility is becoming strained. Perhaps Focus Media's investor relations department can help (I have sent them this post in advance but have received no reply).
Anyone else with an explanation could you please put it in the comments.