This fund run by a SAC Capital alum bought restaurant stocks amid the pandemic
Prentice Capital Management was up 6.6% for the first four months of the year, compared to the S&P 500's 9.3% decline and the Russell 2000's 21.1% decline. The HFRX Equity Hedge Index was down 9.4% for the quarter. Q1 2020 hedge fund letters, conferences and more Gross and net exposures In his first-quarter letter to […]
A letter turning down a Freedom of Information Act (FOIA) request for the Security and Exchange Commission’s (SEC) investigative records into NQ Mobile Inc (ADR) (NYSE:NQ) gave the reason that “staff responsible for this matter have confirmed that releasing the withheld information could reasonably be expected to interfere with an on-going enforcement proceeding,” which is still an important confirmation in and of itself. NQ Mobile is roughly flat in trading today, as most investors must have expected that the SEC was looking into allegations against the company.
SEC investigation not surprising all things considered
NQ Mobile Inc (ADR) (NYSE:NQ)’s troubles started last year when Carson Block’s Muddy Water Research released a detailed short thesis that accused the company of cooking its books and called it a zero stock. The stock immediately fell from above $25 to less than $9 and despite a rally back in March is now trading in the mid-$6 range. A delayed 20F filing, the dismissal of PricewaterhouseCoopers Zhong Tian LLP (PwC), and the recent departure of the company’s CFO have all encouraged short sellers that something is amiss.
With all that in mind, it would be more surprising if the SEC weren’t investigating NQ Mobile Inc (ADR) (NYSE:NQ). Without more information it’s hard to speculate on how this affects the relative position of longs and shorts since we don’t know which allegations the SEC is focusing on or which way investigators are leaning.
Bison Capital offer supports NQ Mobile price, but doesn’t convince shorts
NQ Mobile Inc’s (ADR) (NYSE:NQ) price is also being supported by the non-binding buyout offer from Bison Capital at $9.80 per ADS. While that’s a healthy premium to NQ Mobile’s current price, it’s less than half what it was trading at before Muddy Waters started its short campaign, and if NQ Mobile is able to prove the shorts wrong you would expect its stock price to soar past the $20 mark again. Many shorts have said that if NQ’s management goes through with the deal it will prove them right because it means that people in the know would rather cash out than keep fighting. If insiders knew that the business model was sound, it would make more sense to fend off potential suitors and buyback as many stocks as they can while the price is so depressed.