NQ Mobile Inc (ADR) (NYSE:NQ), the Chinese mobile internet service provider, signed a definitive agreement to sell a minority stake in Beijing NationSky Network Technology, its wholly owned subsidiary, to a venture capital firm.
Proceeds will be used to expand NationSky’s operation
According to the Chinese internet service provider, Beijing Guorun Qilian Venture Capital Center (LP) will purchase a 3.4% stake in NationSky for $18 million, at a pre-money valuation of $500 million or post money valuation of $530 million.
NQ Mobile Inc (ADR) (NYSE:NQ) is also planning to sell as much as 2.3% stake in NationSky to other investors over the next couple of months. According to the company, it will use the proceeds of the sale of its minority interest for the expansion of the core operations of NationSky, research and development, marketing and working capital activities.
Dr. Henry Lin, co-founder and co-CEO of NQ Mobile Inc (ADR) (NYSE:NQ) said NationSky is a fast-growing business and asset that makes his entire company unique and attractive. He expressed excitement about the investment from Beijing Guorun Qilian Venture Capital Center, and is confident that NationSky will continue to be a leader in the enterprise mobility market in China.
On the other hand, Mr. Wang Pengwei, founding partner of Beijing Guorun Qilian Venture Capital Center said, “We believe that the enterprise mobility segment is important as more and more companies need help to maximize the productivity of their workforce and safety of their corporate data on the mobile Internet, and NationSky has a proven track record in the enterprise mobility market.”
Right to demand redemption
According to NQ Mobile Inc (ADR) (NYSE:NQ), the investors have a right to demand redemption of their shares if NationSky does not eventually complete a qualified public offering. They can also redeem their shares if the company does not find a third-party buyer to acquire all or part of NationSky’s shares for a valuation of at least $550 million for its business within 24 months after the completion of the investment.
Results of internal investigation
Muddy Waters, the research firm headed by short seller Carson Block, alleged that NQ Mobile Inc (ADR) (NYSE:NQ) is a massive fraud that has been overstating its revenue and misrepresenting its cash balances. The Chinese mobile internet service provider has repeatedly denied the accusations. NQ Mobile recently released the results of its internal investigation showing no evidence that it committed fraud, however Block noted that the committee that conducted the internal probe admitted that “there was data significant tampering.”
NQ Mobile Inc (ADR) (NYSE:NQ) wrote in its press statement that “the investigation team observed indications that some information might be missing, and the company’s management and staff were unable to provide a credible explanation for what the Investigation Team observed.”