NQ Mobile Filing Suggests 20-F May Not Be So Imminent

Sep. 2.14 | About: NQ Mobile (NQ)

Summary

I wrote an article last week warning investors that despite social media hype, no 20-F filing was imminent.

I reviewed NQ Mobile's 6-K from July 28, which stated the company will now begin to pay additional interest on its convertible bond because the 20-F wasn't filed.

The 6-K reveals the 20-F filing is by no means imminent.

The action by NQ provides some takeaways for investors.

While most people following NQ Mobile (NYSE:NQ) are keeping their eyes on NQ filing their 2013 20-F, it appears that some of those people, including myself, missed the company's 6-K filing on July 28th. Here is what was written in that 6-K.

"NQ Mobile Inc. ("NQ Mobile" or the "Company") has given notice to the holders of its 4% Convertible Senior Notes Due 2018 (the "Notes") of its election to pay additional interest under the Notes as the sole remedy for the Company's inability to timely notify the trustee of the filing of its annual report on Form 20-F for the year ended December 31, 2013 (the "20-F"). This additional interest will begin to accrue from July 29, 2014, and will continue to accrue until the earlier of the day when the 20-F is filed or January 24, 2015. The indenture governing the Notes caps the aggregate amount of additional interest to be accrued under the Notes due to the 20-F not having been filed at 0.5%. If the Company is unable to complete the filing of the 20-F by January 24, 2015, the Notes will accelerate and become immediately due and payable on January 25, 2015."

Let's take a look at some of the major takeaways from this filing:

1) We finally get some insight into the 2013 20-F filing timeline. While many people still speculate the 20-F will be filed any day now, NQ's management believes it could take until January 2015! Assuming the company is indeed legitimate, that seems like an awfully long time to file a 2013 20-F.

2) The company noted it will pay holders of its convertible notes additional interest that has already begun to accrue. The longer it takes for the 20-F to get filed (if it ever does get filed) the more interest expense the company will have. Considering the last thing this company needs is to miss another earnings estimates (note: they are behind on announcing earnings) the additional expense incurred from not filing the 20-F by the specified deadline could come back to haunt the company.

3) The company seems to acknowledge the fact that the company may not be able to complete the filing by January 2015. I think almost all investors would agree that if the company cannot file its 2013 20-F by early 2015 then the shorts will be the ones who emerge victorious.

4) If the company does not meet the January 2015 deadline all the bonds become immediately payable, and the company would need to fork over $150+ million. The company has $283 million according to their Q4 2013 press release, and should they pay off the debt holders (assuming they actually have the cash), the stock price would undoubtedly crater due to their weakened cash position and the fact that company could miss a 20-F deadline by 8 months.

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.