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Hey guys,
I'm curious what everyone is thinking is happening internally at NQ? Maybe it's the impatient person in me but you have to wonder what they have been doing behind the scenes?
1. Anyone put any credence into takeover rumors? You would think that they are not in the best negotiating position unless a company looks at NQ from a perspective for what assets they have, and their growth prospects as opposed to a bailout? Their stock price isn't doing any favors.
2. Do you think the Audit was initiated later than we had ever thought, and thus the timeline is far different than what virtually every shareholder thought?
I'm honestly really perplexed with how this is going, and although big players, most recently as SAC came into play (likely speaking with management very recently as well) the market is heavily discounting any good news, clean audit, and good earnings.
It's trading in no man's land right now, meanwhile when there was anticipation of good news a few weeks ago we were at $21.50ish.
Again, I'm still long and frustrated as hell, but has anyone had any forhcoming conversations with Matt, or anyone else at NQ lately? When I did, I got the impression it was virtually all done..
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I heard that they didn't get to start auditing til beginning of december.
However, at this point, I wouldn't put any thought into takeover.
1. If NQ is legit, Management just might not be interested / too low offers
2. If NQ is fake, They would not want to open their books to other companies given the discrepancy in value
SAC is good news definitely, but they don't have insider info every time, and NQ is such a small portion of their assets that probably one of their traders has it in their portfolio.
The drop is partial instigation by Short FUD and general market slaughtering of tech stocks and China. It's telling that last 2 days saw great recovery for other chinese stocks but NQ still sits in limbo.
Whether that is a function of dead volume, no liquidity etc.. its clear that there are no more big buyers lined up to support at this point.
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I agree this is really frustrating. I also do not understand why the audit is taking so long. As to when the audit started, they put out a PR on 1 Nov 2013 that the IC had retained S&S and Deloitte. So my assumption is that Deloitte started work by 1 Nov at the latest...I have worked with financial DD teams at Deloitte in the past, it usually only takes them 1-3 days to have a team up and running at the client's site.
As to why it took so long, I only have two explanations: (1) the Deloitte team did not know the company at all, so they basically started from scratch; (2) the MW report was comprehensive and if they really checked every major and minor accusation in there + did a re-audit of at least 2012 financials, this may indeed have taken quite a long time. If you think about it, all similar cases in the past (EDU, FMCN) did not have nearly as comprehensive allegations thrown at them as NQ had.
As to why NQ is still trading so weak although it is basically clear to everyone now that MW made it all up, I honestly do not know. Clearly the low float makes it easier for shorts to manipulate the stock.
As to take-over, I also do not believe we will see a full take-over. But having a minory strategic investor would just make a hell of a lot of sense to lend stability to the share price. I am sure Management would have noticed that as well...Toro also alluded to this in one of his recent comments. But then I am not sure how interested Tencent, Alibaba & Co. would be in taking a non-controlling stake....so probably still a long shot
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What are the chances they are auditing FL Mobile and Nationsky as well?
What I don't get is why the audit can't be released in pieces. The main area of concern is the YDT piece. If they release that piece first, MW would lose 99.99% of its credibility right there. I don't see why it can't be compartmentalized, if anyone is more familiar with auditing processes, please chime in
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...sorry, one last thought on why the audit took so long: in the presentation NQ put out to respond to MW (published the Saturday after the attack), they said that the IC report by S&S and Deloitte would be made available to investors. Now this would be a key difference to comparable cases in the past (EDU, FMCN) where the actual reports were never published but the company just issued a PR stating that the investigation has concluded with no "significant evidence" found to support the allegations. If NQ actually wants to pubish the S&S/Deloitte report itself, this will mean that S&S and Deloitte will need to go through a much more stringent INTERNAL process of getting these reports formally approved by their various committees. I know from my own work experience how professional services firms like S&S and Deloitte work and I would say that putting out such a report to the public with S&S and Deloitte logo on every pages certifying NQ is legit will necessitate extreme scrutiny internally at these firms.
So, ultimately the waiting may not be due to NQ but to S&S/Deloitte's internal risk committee procedures. Just speculation of course, but kind of makes sense to me.
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Dietberd thanks, that minor technicality definitely changes the picture a lot if it's considered the way you say. You seem quite familiar with financial DD and auditing.
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'dietberd' pid='40639' datel Wrote:...sorry, one last thought on why the audit took so long: in the presentation NQ put out to respond to MW (published the Saturday after the attack), they said that the IC report by S&S and Deloitte would be made available to investors. Now this would be a key difference to comparable cases in the past (EDU, FMCN) where the actual reports were never published but the company just issued a PR stating that the investigation has concluded with no "significant evidence" found to support the allegations. If NQ actually wants to pubish the S&S/Deloitte report itself, this will mean that S&S and Deloitte will need to go through a much more stringent INTERNAL process of getting these reports formally approved by their various committees. I know from my own work experience how professional services firms like S&S and Deloitte work and I would say that putting out such a report to the public with S&S and Deloitte logo on every pages certifying NQ is legit will necessitate extreme scrutiny internally at these firms. So, ultimately the waiting may not be due to NQ but to S&S/Deloitte's internal risk committee procedures. Just speculation of course, but kind of makes sense to me.
Interesting, I have been hoping they would release the audit like this. It would make a world of difference in my opinion.
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If you look at page 26 of NQ's response presentation, they state: "Also, to further provide comfort to our shareholders, NQ has appointed a special independent board to identify an independent audit firm to re-verify our financials and confirm all of our business operations which will be shared with all of our shareholders once the investigation has been completed."
So my interpretation is they indeed want to re-audit financials AND issue the full S&S/Deloitte report to the public (which, as discussed, just means S&S/Deloitte will need to receive a lot of internal sign-offs).
Considering these two factors I can understand why it took so long - this audit is really different from EDU, FMCN & Co. in these two crucial aspects.
PS: my experience with S&S/Deloitte comes from my past work at a major I-Bank in the M&A department. From that I know that even fairness opinions on completely uncontroversial deals take a lot of time to get internal sign-off at companies like Deloitte...now I imagine that giving a highly disputed company like NQ a clean bill of health will require exponentially more time to receive sign off.
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Dietberd, what are your thoughts on FL Mobile and Nationsky? the likelihood of these acquisitions going through while these 2 are supposedly fraudulent companies withough the major institutions realizing. Wouldn't they be slim to none?
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Karl - I agree. In respect to FL Mobile/NationSky as well as in respect to the entirety of MW's claims, the best counter-argument is that the accused wrongdoing would have required an incredible amount of sophistication & collusion. So many individuals and institutions would have had to conspire on this that by now someone would have resigned or went public or offered himself as a whistle blower to authorities. Conspiracies of such magnitude never hold once they are exposed. But none of this has happened, so for myself, I have to say I am done debating MW (and his cronies)...I am convinced NQ is legit. The next two weeks shorts may be able to keep NQ down, but I still believe in the (long-term) efficiency of markets, and if NQ is indeed legit, then its current valuation is simply ridiculous and the gap to fair value will close sooner or later.
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