Tongxin Intl (PINK:TXIC)

TXIC issued a release on Sat. Nov. 20 in which they said there was no veracity to the rumors that the company would be going private.  They also lowered guidance and made some management changes:

1. Lowered revenue guidance of $100 million - $110 million for the fiscal year ended December 31, 2010.  The previous revenue guidance was $150 million -$160 million provided on February 23, 2010.

The lowered revenue guidance is based on a decrease in market share due to in-house production of cabs, and anticipated drop in orders from international customers in Vietnam. Additionally, the impact of the cessation of certain government sponsored stimulus programs throughout 2010, the slower than anticipated startup of the new medium duty model ("model 1120 Tianrui") with substantially higher content than conventional cabs, and a drop in sales especially in the mini and light commercial truck segments contributed to the revised revenue guidance. The Company also anticipates a later than anticipated start-up on its new medium-heavy duty model ("model 1260 Tianjiao").

Tongxin previously announced on September 17, 2010 unaudited revenues of $121.6 million for the fiscal year ended December 31, 2009.

2. Rudy Wilson was removed as Chief Executive Officer (although he remains as a director) of the Company, and Jackie Chang was removed as Chief Financial Officer and Chief Accounting Officer of the Company.

3. William E. Zielke has been appointed Chief Executive Officer and Chief Administrative Officer of Tongxin International Ltd.  In connection with Mr. Zielke's appointment, Mr. Zhang Duanxiang was appointed Chairman of the Company.

4. There was no truth to the rumors that the Board of Directors was currently considering a "going private" transaction.

by Maj Soueidan

Tongxin Shareholders Urged to Take Action

Over the last couple of weeks I have written several articles regarding an attempt by ChinaHybrids to regain their lost glory. I have talked about how investment banks are finally beginning to perform proper due diligence. I have talked about companies beginning to enact shareholder friendly moves such as stock buyback programs and the release of EPS guidance. Finally, we witnessed instances of companies’ desires to potentially go private. The next logical step in the purification process is to realign company participants with shareholders' goals. This brings us to Tongxin Intl Ltd Com (PINK:TXIC).

Tongxin was at one time listed on the NASDAQ, but has now joined the graveyard of companies on the Pink Sheets. At a time when investors desire quality, the Pink Sheets is the wrong place for a ChinaHybrid firm to trade.  Since July 15, 2010, the company’s reputation has been tarnished by allegations that money has been inappropriately siphoned off to interests other than TXIC, and specifically to a company that has ties to TXIC China-based management.  The good news is that according to my sources this indiscretion has not jeopardized Tongxin’s future.  However, my source does assert that the future of the company’s shareholders are clearly in jeopardy due to an unwillingness of the majority of the current Board of Directors to take steps to bring TXIC back into the good graces of investors. My source has speculated that the current board is corrupt and content with treating TXIC as a private company. This means no more SEC filings, no improvement in internal controls, not addressing the related party transaction issue and an eventual lack of communication with investors.

Hope for Retribution does Exist

If you desire to remain a TXIC shareholder you do have an option to influence the future of the company. You must replace the current Board with individuals who may be better aligned with investors’ interests. As it stands now, I am told that the current board is not cooperating with attempts by  Jackie Chang, CFO and Rudy Wilson, CEO to take necessary steps to bring TXIC back into compliance with the SEC. Rumors have been circulating that the current Board is plotting an imminent attempt to oust Mr. Wilson and Ms. Chang from their positions within the company. In response to this rumored coup, Rudy Wilson has drafted a Shareholder Rights Resolution that would unseat current Board members and replace them with individuals who he feels would be more shareholder friendly. In order to pass the resolution, 51% of TXIC shareholders must approve it. Currently, my source told me that he has around 35% shares in favor of Rudy’s proposal. He also assured me that if the resolution is approved, TXIC would be led by a team who would:

• File a 2009 20F
• Stay current with SEC filings
• Discuss the declaration of a dividend
• Address related party transaction issues
• Improve internal controls
• Become Sarbanes-Oxley compliant
• Take steps to re-list TXIC on the NASDAQ 

Time is of the Essence

I have been told that the current Board will attempt to oust Jackie and Rudy any day now; before the Annual Shareholders meeting scheduled for December 16, 2010. As a TXIC shareholder, you have two choices

1. You can maintain your support for the current Board that has very little ownership stake in TXIC, or
2. Make a calculated gamble on a team of individuals that claims to have a clear vision on TXIC’s responsibility as a U.S. listed public company.

If you choose the latter of the options, you will also be sending a message to other companies in similar predicaments; the ultimate goal is to clean up the China Hybrid space. As a leader in the cause to bring transparency and trust back to the ChinaHybrid space, GeoInvesting encourages investors to immediately email Rudy Wilson to review a copy of the shareholder rights resolution. It estimated that investors have only 20 hours to proclaim their support of the resolution.  The quicker shareholders respond, the less chance there is for the current board to undermine Mr. Wilson’s initiatives.

    Mr. Rudy Wilson, CEO
    Tel:   +1-248-593-8330
    Email: rudy@txicint.com

Disclosure: No position in TXIC

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