If You Bought NQ Mobile Over $9.80, You Could Get Hosed

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 |  About: NQ Mobile Inc. (NQ)
by: Quoth the Raven

Summary

NQ Mobile releases PR about a buyout offer at $9.80/share, representing 30% upside to yesterday's closing price.

People that bought between March 2013 and May 2014 are getting hosed.

This is a de facto "no contest" plea for the company, as I see it. If they could cut it as a public company, they wouldn't be considering going private.

NQ just took their short seller battle to a whole other level. Like George Costanza when he had convinced Susan's parents he had a place in the Hamptons, NQ is "going this distance."

NQ receives a buyout offer this morning!

Over 30% premium to recent share price!

The press release read:

NQ Mobile Inc. (NYSE:NQ), a leading global provider of mobile Internet services, today announced that its board of directors (the "Board") has received a non-binding proposal from Bison Capital Holding Company Limited ("Bison") to acquire all of NQ's outstanding ordinary shares and American Depositary Shares ("ADSs," each representing five ordinary shares of NQ). Bison has proposed a fixed cash consideration of US$9.80 per ADS.

Sure, the offer is "non-binding". Some people in SA commentary think it may not even be a legitimate offer. That's a tale for time to tell. For our purposes, let's assume the offer is legit and that it's going to go through at $9.80/share.

Awesome news to those that had the balls to dive in and buy into this extremely questionable company during their recent plummet. Hey, profit is profit - I can't argue with that. I'd be selling into the open here before another shoe has the chance to drop. This deal has not taken place yet and there isn't likely to be any kind of bidding war over a company that is cloaked under as much controversy as NQ Mobile.

Click to enlarge

Except, if I had told you in January of this year, when the stock was trading at $12/share that they would be going private for $9.80/share, you would have told me I was insane. I can actually go back and pull comments from articles around then. "NQ is a $30 stock," they screamed. "Long-term growth through the roof," bulls exclaimed.

While this is definitely good news for those that were speculating and buying NQ during their recent auditor brouhaha, those that purchased shares at any point in the past or bought with a focus on "long-term" investing in NQ are getting hosed.

This is nearly a sure fire sign that this company is in one way taking a "no contest" plea. If this company was operating 100% legally and could hold itself to the standards that the SEC set for public companies, it would remain public and work its way back up to levels it was previously at.

For those that bought this company over $9.80, this is likely marking a permanent loss you're going to have to take. No more to come in this saga, as I'm guessing this deal gets pushed through without any issue whatsoever.

It's clear this isn't a business decision. This was a tactical "NQ vs. the short sellers" decision, and the company just leveraged one of the more powerful options that it has.

NQ may never be held accountable for issues that are in question regarding its business practices.

Arguments will go on forever as to whether or not the buyout was a good price. Those who bought at $4 cleaned up and made 100% profit. Those that were long-term NQ believers and fund holders with a higher average price are likely getting ready to launch lawsuits as we speak. There's no doubt we can expect to see class action lawyers all over this one.

And if you had told Carson Block haters at $20 that his criticism would have put the company in such a position that they'd need to go private at $9.80/share, I'm pretty sure the shorts would have declared that a success.

But, to each his own - this will look different from all different eyes, depending on when you bought.

If I'm the SEC - how do you let this company just slink out the back door?

That, ladies and gentleman, is why the public markets are used as a vehicle to funnel money from the people who know the game to those that don't.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.