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Akram's Razor  

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  • Tweet Tweet: #IPO#Valuation#Sina [View article]
    I expect them to be very solid, but the market for these stocks is quickly souring.
    Nov 12, 2013. 04:03 PM | Likes Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    A small fraud can create a zero as exposing it kills the existing business. But yeah, i think 2013 numbers are probably accurate and that 2012 or earlier overstatements will be the focus. At the end of the day, they have clearly shown that they have 100ml plus in cash pre convert so it cant be a 'massive fraud'.
    Nov 12, 2013. 10:09 AM | 1 Like Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    I've done nothing. IV on this stock is retarded. It's uninvestable. Borrow to pricey, puts to expensive, and going long to make 30-40% at risk of losing 90% sucks too. I read the toro piece. It's thorough and very mirror image MW's esque. I liked them using umpay business cards to boost character witness credibiity on gross vs net. But for me does very little. YDT has been used to inflate revenues. Might no longer be the case, but just dismissing the account irregularities as saic financials are not that 'reliable' is no different than muddywaters saying that classifying all cash as level 2 means the term deposits might be forgeries.

    Also, not one peep on what was dug up on zhou and xu, except a clever jib at MW's comments regarding IR's inconsistencies on her nq employment, which btw they have ignored here too.

    I get this business. They were reckless early on, and are much more legit now and doing the best to bury the past. It's a pr battle until the regulator looks at those 'meaningless filings'....'and inconsistencies'.
    Nov 12, 2013. 09:34 AM | Likes Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    To be frank I am not suspicious of Toro. I think they have done their homework from a 'tech perspective' here and bought into a believable secular growth story. If I can fault them anything, it is that by the virtue of doing so much due diligence on the business model they seem to have hard time acknowledging that they have overlooked a lot of easily identifiable red flags with respect to the company/founders/mgmt. I for one would not tolerate a mgmt team in this space and at this stage that would ever engage in stockbuybacks regardless of the share price. If the company is that cheap, go find some PE backing and do an MBO. Otherwise invest in the business what you reasonably can, and let the cash accumulate into a war chest. If the stock doesn't take care of itself by the time your growth slows markedly, then go out and start buying it back if you have nothing better to do with your capital.
    Nov 10, 2013. 09:16 PM | 1 Like Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    I really don't think you have dealt with this stuff before. Almost all cooking the books exercises are a question of revenue and not cash. Raising money and ever increasing dso's are ways in which revenue is inflated with no visible impact to cash. Honestly its basic ponzi finance. And no auditors resign after something like this until they have completed a full investigation as they will bear reputational damage. But again auditors can be careless, but that doesn't make them complicit. If the part of the story that sets of audit alarms is sitting on ydt's books, then it is quite difficult to blame them for not becoming suspicious. As for the IB's, you won't hear a peep out of the underwriters until the regulators weigh in. These guys are in bed with nobody but the almighty dollar. NQ stock was hot and in a hot space, and thus they placed debt for them which they knew would be easy to place and earn them handsome fees. They will respond when the regulators give them a reason to.

    As for Omar Khan not joining them. Money talks, and a $100 mil in stock will make a believer out of just about anyone. Also, the wedge guy left a job as CIO and President of Research to work as IR at NQ . I can tell you i cant think of a single CIO who'd do that for anything less than an insane pay package. So, nq is obviously quite generous w stock comp.
    Nov 9, 2013. 03:03 AM | 1 Like Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    I am convinced now that there will be material restatements. It's very difficult to not reach that conclusion with all that has come out. Now defining fraud is a different story. MCI, ENRON, and countless others were running legitamate businesses that ran themselves into trouble with certain fraudulent activities that were used to boost revenue, and in turn the stock. There is a very good chance that the most concerning stuff relating to NQ predates Omar Khan, and is not that material of a portion of current business. Problem is that makes no difference as far as regulators will be concerned, and will definitely impact their latest debt offering.

    Again, I am always fascinated how defensive investors become when these things are unearthed. It really is quite remarkable. No matter what anyone says people always get testy about short sellers when in fact they do nothing but provide a check against reckless and unethical corporate behavior. I used the wall street quote to open this because it is so perfect for the NQ situation. Whatever you may believe, it was wreckable simply because of managment's very reckless approach to running the business. This is not how you build a "100 year" enterprise, and a global mobile platform leader. Simple things like using a clearly independent carrier biller, always keeping cash on hand, and not making interest free loans to a related party would have shielded this company from such an attack. To blast the people that called attention to this makes no sense to me because it is in fact worth calling attention to. The foundation they are willing to build this business on is weak, and that is why one report was capable of knocking the stock down 60% in a day. And more importantly it is why the stock is still lingering. That is what you should focus on. They have weak internal controls. That is the best thing I can say about them at this point. The worst thing is that these controls are weak because they needed to be to allow for some level of revenue overstatement. Anyone not thinking long and hard about that is in denial.

    Furthermore, the stock is not exactly cheap, and I can tell by many posts here that it is ameteur hour when it comes to reading a balance sheet. The convert is not cash. It is debt, and will remain so until the stock basically triples from here. Furthermore, there are clauses that could require this debt to be bought back immediately. So netcash is no different than it was before this was raised which relative to the market cap is nothing to write home about
    Nov 8, 2013. 04:03 PM | 1 Like Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    Good to know. My track record as an author speaks for itself. I'm honest, thorough, and objective. I have over 2k people (ceo's, fellow hedge fund managers, industry experts etc)who have been reading my very regular market musings for nearly five years now. I have at times covered just about anything you can think of investing wise. So, i understand the imortance of integrity.

    A better topic of conversation is why are you so defensive of this name? I have learned to walk away from stocks short or long when things arise that call into question my thesis. Its probably the best lesson in investing. As the other 99%, plays stubborn. This mgmt team doesn't give a damn about you. So, what you should be asking yourself is do you actually comprehend the issues that are staring you in the face? Do you think trying to shoot down the very straightforward questions i have asked will somehow help the stock bounce back? I didn't dig this up, and everyday there is more and more coming to light on this. It seems this has attracted just about anyone who has ever shorted a chinese fraud. They are most likely amazed that this one slipped through the cracks.
    Nov 8, 2013. 12:20 PM | 2 Likes Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    Because when I own a huge stake in a floated company siphoning off a few mil in cash is nothing close to what I will get from my stock quintupling if i can inflate my growth rate. But yes, you can't rule out that ydt was used to siphon out some cash. However, the discrepancies between cash,ap, and ar at both companies would seem to indicate that it is more likely were simply recycling the loan back to nq as revenue
    Nov 8, 2013. 10:30 AM | Likes Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    I am still not short if that is what you want to know. But I will buy some nominal puts today just so that i don't feel like a fool for wasting my time if this gets halted. I have no doubt there are overstatements here now...question is how signficant. There is no other plausible explanation for the dscrepencies, structure, relantionships, etc.
    Nov 8, 2013. 10:05 AM | 1 Like Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    Sorry, but based on your last two comments I find that hard to believe. These guys have been cooking the books, you have to be blind analyst not to be highly suspicious here. As a said before, I could care less about whether xu was a consultant/employee. And whether NQ muddled that. I was more interested in the relationship between her and NQ's co-founder zhou, and that is now fully clear. She is a liutenant not a friend/fellow entrepeneur. It is clear YDT was acquired at his behest to serve his plan for NQ. At this point, I wouldn't even bother asking xu anything or trying to explain it away. She is definitely in deny/cover up mode, and probably slowly coming to grips with the fact that she will be made the fall person.

    I also see no way based on all that has been put out there that the regulators don't step in here. All this doesnt seem to concern you even though it appears you have staked your entire firms reputation on this one stock. Which based on my experience in this biz makes little sense. If you have dealt with investors (presumably you have client money in nq), you know how they get at times like these. No matter how well you have done for them in the past they will not be forgiving. I've been there a few times with people who have done real well off of me. So, being right might not even matter if they end up concluding this is too risky for their money regardless the outcome. Because at this point you are in a binary stock with skewed downside risk (delisted/zero vs a gradual recovery over time to $20+), and i don't know many investors, even the most risk tolerant, who want that to be more than 5%-10% max of their exposure. And even then at least have the immediate upside being far greater than the downside which is not the case here.
    Nov 8, 2013. 03:55 AM | 1 Like Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    Right up until this point I wanted very hard to believe you guys. Now I am much more convinced you are simply part of a promote. That or a small chance that you have simply been brainwashed by spending to much time with these folks and touting the stock to your investors, and are consequently having a very hard time objectively analyzing this position. Your information simply doesn't compute.

    NQ IR has ZHOU listed as CEO and Founder of Beijing Polywin where it turns out Xu was his gm. This is what was conveniently omitted and which you seem to have chosen to ignore in two straight comments. Xu's resume jumps from Wanxiang to NQ. Zhou was not VP of BPT if you are asserting that BPT and Wanxiang are the same company....

    Xu acquired YDT while working at BPT. Furthermore, 9h was founded solely by Zhou in nov 2007. Xu is not even in the picture until 2009.

    And what is this star employee turning around?

    YDT has appeared to do nothing up until recently but collect money for NQ. Is the fact that your former boss founded a company that will generate $20 mil in annual billing for you evidence of a turnaround after he also provided you with the cash to acquire your company?

    Alos, YDT is co located with 9h, has a handful of employees, and has a related party with an SP license as its best customer. Better yet they seem to provide them interest free loans despite no discernable need for such loans to run said business.Yet all this doesn't seem to concern you a bit.

    I am going to take a position in nq tmrw simply to have skin in this game because I now have a very hard time believing that at some point there were not material overstatments of nq revenue courtesy of fake billing via YDT. I also think the balance sheet of ydt/nq cannot be reconciled in anyway whether you agree with their net revenue reporting assertion or not. Where is the cash that should be held at YDT as it passes through on its way to nq?

    Also, setting the facts of this whole story aside, I can't for the life of me reconcile the interest free loan.Then when i stick that in with what is being asserted by ydt/nq it doesn't compute at all. Xu describes this as a low expense simple business that has favorable payment terms. Then why does it need loans? Let alone $5mil which is 2x 2012 reported net revenue?

    You amazingly seem to think all of this can be explained away in two seconds and is nothing to worry about or worth just ignoring. When in reality looking at the payables, receivables, and cash balances along with the loans would lead to almost no other conclusion then that the loan is being recycled as revenue for nq.

    I also think that all of this explains NQ's desire to earn higher yields in term deposits on its cash. It would appear the goal here was to plug whatever hole was created along the way with the proceeds from investment income on cash. That makes a lot more sense to me then what MW's was asserting about it not existing, and reconciles the bizarre 100% level 2 outlier that caused so much initial controversy.

    This would also seem to compute with an overall thesis that this company is now going fully legit after having no more need for partially faking it, and has been making moves to provide this asthetic. Problem is it seems getting over these past indiscretions is going to be quite a challenge.

    If i am wrong, I am happy to write off some options. And if i am right i will at least feel this whole thing contirbuted to my ongoing and ever evolving experience of short-selling even if it doesn't really impact the bottom line.
    Nov 7, 2013. 08:10 PM | 2 Likes Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    Good to see you completely ignored the very relevant questions raised with regards to ms. xu. So, she in fact concealed that she worked for zhou as an employee in an SP. She is clearly not some amazingly successful businesswoman, but rather a former lieutanent of zhou who has become the face of related entities. If this was in fact not the case, I really would like to know why she would not share this history when this controversy started.

    I still have no position, but honestly i'd like to know how I am supposed to believe that there were no impropreities here. I gave you the benefit of the doubt, but honestly if after all this research you missed this glaring fact; I dont have much to say.
    Nov 7, 2013. 01:31 PM | 1 Like Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    Did that answer my question?
    Nov 7, 2013. 10:15 AM | Likes Like |Link to Comment
  • NQ Mobile: A Neutral Observer's Take [View article]
    So, based on this new data do you still say that 'related' has nothing to do with it. If 9h was actually founded by zhou and then renamed and transferred to xu doesn't that jump out at you. Also, the fact that xu worked at an SP owned by zhou before nq which did not come to light until recently, and that she now owns an sp that has been critical to nq, doesn't catch your eye. I mean why was this not disclosed before? She seems to have had a good reason to not share this history?

    And why does a company that seeks to maximize yields via term deposits lend cash interest free to a carrier biller with virtually no overhead and favorable payables to receivables spreads?
    Nov 7, 2013. 09:29 AM | 1 Like Like |Link to Comment
  • If You Believe In Yidatong (NQ's Largest Purported Revenue Source), You'll Believe In Santa Claus [View article]
    So the convert counts as cash but not as a liability. It's more like 115mil cash vs 600ml cap
    Nov 6, 2013. 04:06 PM | 1 Like Like |Link to Comment