Imagine a company mired by fraud allegations and every time an executive departs they chalk it up due to "personal reasons" and then throw in some seemingly positive news in an attempt to masquerade the departing executives. Does that company sound like a trustworthy company to you? To me it does not.
We don't have to imagine the previous scenario because it is unfolding before our eyes with NQ Mobile (NQ). The company announced that the founders of the company will be holding their shares for at least two years as a testament to their belief in the company. Oh, and by the way, yet another executive is stepping down. This time it is Dr. Henry Lin, one of the co-founders of the company and a Co-CEO. Today's press report reeked with suspicion of a company attempting to shift attention away from another executive stepping down and focus on the fact that the co-founders will hold their shares for at least two years. My question is why wouldn't the company release that fact early? The stock has been stuck in the $5-7 range for weeks now and announcing that co-founders would keep their shares would probably have given the stock a boost. In my opinion, when Dr. Lin announced he would be stepping down for whatever reason, the company knew it had to combat the suspicious departure with some positive news. Some investors might say that by agreeing to a two year lock up it proves that the company's shares are not worthless; I disagree. I think this is another PR ploy to soothe investor concerns. By agreeing to the lock up the co-founders know that some investors will buy into the hype and the stock would rise as it did for most of the day. This benefits the owners because it creates a false sense of legitimacy around the company.
Let's take a look at some other executive departures. CFO KB Teo resigned for "family reasons" after serving for only a few months. Prior to KB Teo, the CFO and CAO was Suhai Ji who left when KB Teo took over. In July, Ms. Ying Han, the Chair of the Audit Committee, stepped down, do to reasons not related to the company. In addition, in the very last paragraph, the company made the revelation that PWC would need to expand the scope of its 2013 audit. The company made sure to announce that, despite the departure at an inopportune time to say the least, they added two important members to the board and the audit committee. In what was surely not a coincidence, the company released this information on July 3rd, right before a long holiday weekend, knowing full well not many people would be paying attention.
With multiple senior management departures, press releases that attempt to divert attention from negative news, and a crucial press release right before a long holiday I no longer can accept that all of this negative news is a coincidence.
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.