The9 Limited: Investors Should Not Be Able To Justify The Share Price

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About: The9 Limited (NCTY)
by: Villamayor Capital
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Villamayor Capital
Growth at reasonable price, value, event-driven, arbitrage
Summary

The9 Limited develops and operates proprietary online games, mobile games, and TV games.

With the exception of Song of Knights, other games are still in process of development. This is very worrying.

Certain investors may appreciate that the company is entering the blockchain industry. Investors may claim this fact to justify that the company trades at high valuation.

The fact that the asset/liability ratio is below one is worrying. In addition, the amount of financial debt also is an issue.

In a very recent annual general meeting, the company decided to increase the number of authorized shares from 250 million to 350 million. It opens the door to the sale of a larger amount of shares.

Investors should not be able to justify how The9 Limited (NASDAQ:NCTY) is trading at $2.25 with negative book value per share and no revenue growth. In addition, the company seems to be issuing