In-flight W-Fi: AirMedia responds to false allegations

AirMedia Group Inc., a leading operator of out-of-home advertising platforms in China targeting mid-to-high-end consumers, as well as a first-mover in the in-flight and on-train Wi-Fi market, today released the following letter from Herman Guo, its chief executive officer, to shareholders to respond to allegations raised in an article posted on seekingalpha.com on April 28, 2015. The company believes that the allegations and accusations set forth in the article are false and inaccurate and contain numerous errors of facts, misleading speculations and malicious interpretations of events.

Letter from the CEO

Dear shareholders,

Before clarifying the facts, first, I would like to share with you my thoughts and motivation behind the transaction we announced on April 7, 2015 (the “Transaction”) to sell 5% equity interest of our PRC affiliated entity, AirMedia Group Co., Ltd. (“AM Advertising”) to Shenzhen Liantronics Co., Ltd. (“Liantronics”). As you know, we endeavor to transform into a leading in-flight and on-train Wi-Fi operator in China. We believe our Wi-Fi business will have tremendous growth and monetization potential when hundreds of millions of passengers use our Wi-Fi services when they travel. As for our current advertising business, we noted the wide valuation gap between China’s local stock exchanges and U.S. stock exchanges and would like to capitalize on the sale of our advertising business at a much more attractive valuation to companies in China. We intend to sell the remaining equity interests of our advertising business in the foreseeable future so that we can focus our resources on the exciting Wi-Fi business.

AirMedia and Liantronics are listed companies in the United States and China, respectively. The Transaction between the two companies is arms-length and serious.

The claim that Liantronics has not even conducted due diligence in connection with the Transaction is erroneous. In contrary, Liantronics engaged a major PRC accounting firm, a recognized PRC law firm, a qualified PRC assets appraisal company and a recognized PRC financial advisory firm to conduct due diligence of AM Advertising in March 2015.

In connection with the Transaction, we requested and have obtained a call option which provides that “during the period of 75 calendar days after Shengshi Lianhe receives full payment from Liantronics (the “Waiting Period”), we may elect to sell our equity interest in AM Advertising to third parties, and if we so elect, Shengshi Lianhe will repurchase such 5% equity interest from Liantronics for an amount equal to RMB150 million plus applicable fees.” Several unrelated parties have expressed interest in buying equity interests of our advertising business and we would like to preserve the ability to evaluate other potential offers and enter into transactions with the party or parties that will give us the most satisfactory terms.

In exchange for our call option, Liantronics requested and has obtained a put option to revoke the Transaction after the expiration of the Waiting Period.

Although AirMedia had consolidated net loss, our stand-alone digital frames, mega-size LED screens, traditional media in airports and unipole sign and other outdoor media out of airports, which will be the business lines left in AM Advertising after we sell the advertising business, have been profitable for years and we believe they will continue to be profitable in 2015.

I would also like to take this opportunity to give our sincere thanks to our long term shareholders for supporting us. According to the most recent list of institutional shareholders by Nasdaq.net as shown below, institutional shareholders hold 20.78 million ADSs of AirMedia and our top 10 institutional shareholders hold 31.78% of AirMedia’s total issued and outstanding shares.

In closing, our in-flight and on-train Wi-Fi business is still at an early stage of development while we are obtaining more concession rights and strengthening our market position. We expect to install and operate Wi-Fi services on more ordinary trains and high-speed trains in 2015, and start monetizing this unique Wi-Fi business. Similar to most internet companies, our new Wi-Fi business may have a period of loss at the early stage, but we believe tremendous growth opportunities are ahead of us.

We plan to arrange meetings with investors in Hong Kong and United States in late May and early June after our first quarter earnings release. Look forward to seeing you on the road.

Herman Guo
Chief Executive Officer