The9 Limited (NASDAQ:NCTY) is a Chinese based gaming company. It was once a "high flyer" who licensed World of Warcraft ("WOW") in China. At it's peak it's stock reached $50/share.
However, since losing the said license the company's revenue and stock price has been on a steady decline. The only things the company had going for it since the loss of WOW were a massive cash horde and an interesting gaming pipeline.
The cash has since been depleting at a rapid pace but for good reason. The9 bought a controlling interest in Red5 Studios which is run by Mark Kern. Kern played a major role in the development of WOW and has since been developing "Firefall". In addition, the company has a licensing deal with Sony to license "Planetside 2" in China.
The stock was trading below $2/share a little while ago and climbed to about $4.20/share before coming down to about $3.50/share recently.
This company's stock has the potential to significantly increase due to the arrival of several catalysts:
1. The company's chairman - Jun Zhu - is the company's largest shareholder. He owns about 23%. And the float is quite small (about 13M). There have been reports that Zhu has been meeting with bankers in the USA to obtain financing to take the company private. Just recently he has announced that he purchased an additional 200,000 shares and will be purchasing a further $5,000,000 worth of stock. And what a great time to take this company private given the below catalysts (gaming releases).
2. The company itself has been buying back it's shares at a relatively quick pace. For example, in January the company bought about 6% of their outstanding shares alone.
3. Firefall is being developed by Mark Kern who is well respected within the industry and did an excellent job with WOW. Firefall has a massive following and is finally being released in the USA and Europe on July 9th of this year. Some are saying that it could be as big or bigger than WOW. If that is the case, its "To the moon Ollie" for this stock! The China release will be more important and will likely not be until 2014. Let me put it this way, about a year ago the company sold licenses to two companies in the amount of $35,000,000. This is a proof that there are great expectations for this game. Zhu has actually stated that he believes that Firefall will be bigger than WOW and has indicated that he wants to buy back some of the licenses he has sold.
4. Planetside 2, developed by Sony, did good in the US and Europe but in its first 8 days of being released in China (June 2013) it has already surpassed what it did in the US and Europe according to reports. A very good sign.
5. On September 28th of this year the company will release MU which was developed in house. This game is not nearly as big as the above 2 games but will help the company inch towards profitability.
6. If "Firefall" really is worth all of the hype it has received over the years, could the company be a takeover target? Certainly a possibility!
7. The company has no debt and a decent (but burning) cash position.
Conclusion: As you can tell, I am a shareholder of the company and would like to see its' success. I have obviously focused on all of the positives of the company with little emphasis on its downfalls. Essentially, if Firefall is a bust then it is likely that the stock will capitulate with the company. This is a very risky proposition. However, I encourage you to do your own due diligence and re-read the above 7 points. In addition, try Firefall - it's a great game! Why would a Chairman sink so much money into a sinking ship? Why would Mark Kern put his reputation and future on the line for something that is mediocre? The hype is real and so are the catalysts! I believe that the upside potential is real and with such a small share float this stock could double. "To the moon Ollie"
Disclosure: I am long NCTY.