Investors To China TechFaith Wireless: Here's How To Maximize Value

Shares of China Techfaith Wireless Comm. Tech. Ltd CNTF have lost more than 55 percent over the past year and nearly 95 percent since its 2005 IPO.

Investors John Romero and Patrick Small wrote an open letter to the company's management.

The investors argued that shareholders have "suffered enormously" under the current leadership.

China Techfaith Wireless Communication, a China-based mobile solutions provider for the global mobile handsets market has seen its share price plummet nearly 95 percent since its 2005 IPO, which was priced at $16.25 and valued the company at nearly $700 million. The stock was trading at $0.58 per share on Thursday while its market cap stood at $28.3 million.

John Romero and Patrick Small are two investors who wrote an open letter to China Techfaith's management on Thursday.

"We recognize that technology life cycles are short, unpredictable and highly competitive and do not want to examine the past," the investors wrote. "The fact remains, however, shareholders have suffered enormously (emphasis deleted) under your leadership as is evidenced by the fact that the share price has declined 95 percent while the company's net assets have increased substantially."

Contents Of The Letter

The letter went on to point out that the company's commercial real estate (CRE) based balance sheet is not appropriately reflected in the stock's price. Specifically, the letter claimed that the company's net assets has grown from $137 million in 2005 to $351.4 million in 2014 and stood at $348 million at the end of the second quarter of 2015.

The letter suggested that "shareholders have lost confidence and trust," while corporate communications have dropped by 50 percent in terms of public releases since 2011.

"Simply put, shareholders want management to become engaged, run the business in order to maximize all shareholder value, proactively communicate and become the shareholders [sic] advocate (emphases deleted)," the letter continued. "If management were outside investors, not personally connected to the company, would you be a shareholder? We highly doubt it."

Finally, in order to maximize shareholder value, the investors strongly "implore" the board to form a special committee to study the following:

1. Reinstate the already existing $10 million share buyback program, divest the wireless business and IP to become a pure play CRE business.
3. Clarify if the company is a CRE business with a plan to deliver returns back to shareholders.
4. Explore a one-time special dividend.
5. Explore a one-time tender offer to buy back 25 percent of the outstanding ADS.
6. Explore a rebranding.

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