NQ Mobile Inc (NQ) Surges After Share Buyback News

NQ Mobile Inc (NQ) Surges After Share Buyback News

NQ Mobile Inc announced this morning that its board of directors has authorized an additional $80 million in share repurchases. The news sent American Depository Receipt shares of the Chinese company’s stock up by more than 17% in premarket trading this morning.

NQ Mobile to buy back more stock

In a press release this morning, NQ Mobile said its board authorized up to $80 million in share repurchases over the next 12 months. The company may buy back its shares “from time to time on the open market.” It could also negotiate private transactions for share repurchases or buy them in “block trades and / or through other legally permissible means.”

NQ said it will pay for the share repurchases using its current cash on hand. Today’s news comes about a month after the company said it remained committed to share buybacks.

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NQ Mobile looks to boost stock price

This morning’s share price increase comes after about a month of straight declines. The biggest decline in the Chinese company’s share price has come since its last earnings report, as it disappointed Wall Street with its earnings and unit sales results.

Shares of NQ Mobile have been highly volatile since Carson Block of short-selling firm Muddy Waters alleged that the company overstates its revenue and is a fraud. The stock has fallen more than 80% since he first made those allegations.

Block apparently cut off on NQ’s earnings call

Last week Block attempted to ask a question about former co-CEO Henry Lin’s sudden departure. There have been reports that the former NQ executive has been unreachable for some time, and then his resignation was announced.  The transcript from NQ’s earnings call suggests Block hid his identity in order to ask a question on NQ’s conference call, claiming to be Jim Oberweis Jr., who had at one time been NQ’s second-biggest shareholder.

The operator introduced Block as saying his question came from Oberweis. When he began to ask his question, however, the transcript shows that he did reveal his true identity. Before he could finish the question though, the call was mysteriously dropped, and of course there was no answer to his question provided. It’s unclear whether a technical glitch was to blame for Block’s mistaken identity or whether the short-seller purposely hid his identity.

Others allegedly prevented from asking questions

Vijay Marolia of Regal Point Capital, another known short-seller of NQ Mobile shares, alleges that he and one of his team members were also prevented from asking questions on NQ’s earnings call. He told ValueWalk that they followed the instructions for submitting questions exactly but were not permitted to ask their questions.

He believes NQ Mobile management may have lied when they said they didn’t see any more questions on the line. It’s unclear whether this same issue affected anyone else who may have been on NQ Mobile’s earnings call.

Marolia’s question was similar to Block’s question: “Why would the founder & Chairman / Co-CEO, who was by far the biggest cheerleader of the company within the last year, give up on his announced 100 year strategic vision for the company 99 years ahead of schedule?”

Thoughts on the FL Mobile deal

The short-seller shared some of his thoughts on the FL Mobile transaction, questioning how realistic it is for a company with a market capitalization of $253 million to be able to sell a subsidiary for $600 million. He also wonders why NQ would sell it for shares of a “shell company w/ little assets [Tack Fiori] instead of cash. He pointed out that shares of that shell company were trading at more than 480 times sales.

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