FAB Universal (FU -4.6%) falls after Chinese fraud researcher Alfred Little issues a short report on the Chinese video content distributor, noting that "FAB's anti-piracy claims are a total and complete fraud."
AL states that based on the firm's due diligence, FAB's Intelligent Media Kiosks are "loaded with very obviously pirated U.S. movies."
The report also claims that FAB's kiosk manufacturers have only supplied 1.6K-1.7K kiosks to the company, or 10% of the claimed 16.8K units deployed. Additionally, AL states that FAB's director of franchisee sales stated that the company only has ~1K kiosk in Beijing, vs. the 3.9K disclosed in a company proxy statement.
AL writes that the company faces a significant undisclosed liability due to the company's promise to kiosk franchisees of guaranteed minimum returns and buyback clauses using FU stock.