The shares of NQ Mobile plummeted due to its proposal to sell FL Mobile to Tack Fiori International Group Limited.The Chinese mobile internet service provider was also negatively impacted by its disappointing financial results for the third quarter.
Last Friday, NQ Mobile reported earnings losses of $17 million of $0.04 per American Depositary Shares (ADS).
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The stock price of NQ Mobile was down almost 13% to $3.57 per share at the time of this writing around 3:16 in the afternoon in New York.
Details of NQ Mobile’s planned exit from FL Mobile business
NQ Mobile signed a non-binding memorandum of understanding (MoU) with Tack Fiori International Group Limited.
Under the MoU, the Track Fiori is offering to purchase 100% of the equity interest of NQ Mobile in FL Mobile at a price range of $570 million to $640 million. The proposed acquisition price will be payable through certain allotment and issuance of certain numbers of new shares of Tack Fiori.
Following the completion of the proposed transaction, NQ Mobiles and/or its affiliates will become the controlling stockholder of Tack Fiori. The proposal deal is subject to customary closing conditions and regulatory approvals.
‘Nothing left in the tank’
Henry Guo, a senior analyst at JG Capital recently commented, “NQ Mobile after the conference call is even more opaque than NQ Mobile before it. The decision to sell the company’s gaming business, the only sector which investors understood, the sector which actually brought money, the only high-visibility story at NQ Mobile, means that there is nothing left in the tank. There is absolutely nothing the company can offer.”
NQ Mobile stock worth less than $1
NQ Mobile has been accused of overstating its revenue by Carson Block, a short seller and founder of the research firm, Muddy Waters. He believed that the stock of the Chinese mobile internet service provider is worth less than $1 per share.
The shares of NQ Mobile dropped 82% since Muddy Waters made its accusation against the company. Block called the company a “massive fraud.”
During the recent conference call of NQ Mobile, Block’s phone line was abruptly cut off while asking a question to management of the company. He was trying to ask the company regarding media reports that its former co- CEO Henry Lin has been unreachable for a few weeks. The company announced earlier this month that Lin resigned due to ‘personal’ reasons.