Notable Calls Network (NCN): Wedge Partners on BIDU

Notable Calls Network (NCN) caught a very nice call in Baidu.com (NASDAQ:BIDU) yesterday. We were super-early on it, which is just the way we like it.

- Around 10:30 AM ET a contributing member of NCN told me to get short BIDU fast as Wedge Partners, independent equity analysis firm with a focus on the technology and media industries was making a big negative call in the name.

A minute later I received the details:

VERY NEG BIDU (Confirmed just now by analyst in Beijing).... Just now (literally 10 mins ago) on CCTV2 a popular TV show, Baidu was exposed by CCTV about providing unreliable advertisement to consumers, accepting ad for healthcare companies without business license and etc.

Remember, at the end of 2008, Baidu's stock price more than halved by the 2-days continuous attack from CCTV. Baidu's stock might be materially impacted by this short term.

Knowing how potentially significant this call could be, I swiftly distributed the details to other Notable Calls Network (NCN) members. This was exactly the type of info people were looking for.

- Over the next 30 minutes the stock started breaking down as more details emerged:

1) BIDU provided links to fraudulent websites for consumer goods and travel agency services. Consumers who followed the BIDU search results to these sits and made online payments were victims of fraud as the online travel agencies and consumer goods companies were not real.

2) The show highlighted how BIDU’s own sales force (Wedge's Lin Juan actually believed they are probably BIDU’s distributor sales folks) actually advised and helped companies who did not have qualifying licenses help fake or bypass the issue.

3) The show also mentioned and brought up the entire 2008 scandal related to healthcare companies who did not have proper licensing.

Link: CCTV exposure caused by Baidu search site users provide false deceived


- By 11:30 AM ET the stock was down 7 pts. A hefty intraday trading gain.


PS: Morgan Stanley is out this morning with a cautious call on BIDU saying they expect some pressure on the stock price, as CCTV's claims appear more widespread this time (vs. 2008), covering more than only healthcare listings.

The firm has issued a Negative Research Tactical Idea saying the share price will fall relative to the country index over the next 30 days. They estimate that there is about a 70% to 80% or "very likely" probability for the scenario.

The stock is trading around $140 in pre market, another 4 pts lower from yesterday's close.

Obviously, Wedge Partners deserves a Kudos here. They beat the rest of the Street by a mile.


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