NQ Mobile Inc.
- Company Name
- NQ Mobile Inc.
- Stock Symbol
- Class Period
- March 30, 2017 to February 6, 2018
- Motion Deadline
- April 11, 2018
The complaint charges NQ Mobile and certain of its officers with violations of the Securities Exchange Act of 1934. NQ Mobile provides internet services in the People’s Republic of China and internationally.
On March 30, 2017, NQ Mobile announced it had entered into agreements with Tongfang Investment Fund Series SPC (“Tongfang”) to complete the divestment of FL Mobile Jiutian Technology Co., Ltd. (“FL Mobile”) and the sale of Beijing Showself Technology Co., Ltd. (“Showself”), pursuant to which Tongfang would acquire all of the equity interests beneficially owned by NQ Mobile in FL Mobile and Showself (the “Transaction”).
The complaint alleges that during the Class Period, defendants made materially false and misleading statements and/or failed to disclose material information regarding NQ Mobile’s business and operations, including information regarding related-party transactions involving the Transaction between NQ Mobile and Tongfang and that, due to the related parties involved in the Transaction, NQ Mobile had agreed to consideration in the Transaction in the form of a note with a high likelihood of default. As a result of defendants’ false statements and/or omissions, NQ Mobile securities traded at artificially inflated prices during the Class Period, reaching a high of nearly $4.50 per share.
Then on February 6, 2018, a report entitled “NQ Mobile: Undisclosed Transfer of Subsidiaries to Chairman Introduces Significant Risks – Price Target $0” was published on SeekingAlpha.com. The report revealed that the Transaction included unreported related-party transactions involving Vincent Wenyong Shi (“Wenyong Shi”), the Company’s Chairman and Chief Operating Officer. According to the report, while Wenyong Shi’s interest in FL Mobile had been disclosed, the Company did not disclose that Shi “would acquire an interest in Showself nor did it disclose that NQ [Mobile] would transfer its shares in both companies to Wenyong Shi instead of Tongfang.” In addition, the report stated, among other things, that pursuant to the Transaction agreement, “the obligation of Tongfang to pay the last installment of the purchase price was subject to satisfaction or waiver by Tongfang of NQ [Mobile] completing the registration evidencing Tongfang as the record owner of 63% equity interest. Not only was Tongfang never recorded as the owner, but Wenyong Shi was recorded as the owner nearly eight months before the final payment was made in December 2017.” According to the report, “the only way . . . that NQ [Mobile] did not default on this agreement [was] if Tongfang waived its rights to the share transfer, which [the report] found hard to believe an independent third party would do.”
On this news, the price of NQ Mobile shares fell $1.30 per share, or over 44%, to close at $1.68 per share on February 6, 2018.