{ "docId": "019dd923-622c-750b-8b96-2fbe642fbf78", "docSlug": "69cc18cfe079", "documentTitle": "NQ Mobile (NQ)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2013-10-24 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 23, "pageCount": 81, "prevPage": 22, "nextPage": 24, "slideType": "research-note", "function": "expose_contradiction", "density": "dense", "nDataPoints": 3, "notes": "This is a page from a short-seller research report (likely Muddy Waters or similar) investigating NQ Mobile.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b96-2fbe642fbf78/23", "deckHref": "/decks/019dd923-622c-750b-8b96-2fbe642fbf78", "deckJsonHref": "/decks/019dd923-622c-750b-8b96-2fbe642fbf78.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-2fbe642fbf78#slide-23", "components": [ { "bbox": { "h": 0.05, "w": 0.78, "x": 0.11, "y": 0.54 }, "kind": "callout", "text": "NQ’s online (lack of) card sales affirms our physical store checks that show the cards are obscure and immaterial to NQ revenue.", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "827c8dbd-1f25-4e98-8d0c-bfda2ed5c3aa", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "NQ's online (lack of) card sales affirms our physical store checks that show the cards are obscure and immaterial to NQ revenue.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0935-737e-8dc8-9beec52ca1ca", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.28, "w": 0.78, "x": 0.11, "y": 0.25 }, "kind": "paragraph", "text": "After asking investor relations for information on China prepaid card sales and sellers, customer service began refusing to discuss prepaid cards. October 14, 2013, we called customer service again to inquire about card sellers in other cities. The service representative said to us that they only provide technical support for the products and do not engage in sales, instead kept referring the customer to other sales channels. While on the surface this response appears relatively benign, their prior willingness to help check, identify, and contact us through follow-up communication was noticeably absent. We believe this was a result of a corporate directive to forbid further disclosure of details on the Company’s prepaid card distribution (or lack thereof). This lasted for a few days. Then customer service changed its tune again, urging callers to buy prepaid cards for China Mobile, China Unicom, and China Telecom to pay for NQ apps. We believe that NQ was preparing for being exposed as having no real prepaid card sales by being able to retort “You do not understand our business; prepaid cards also include carriers’ cards”. To the extent this is true, it is a payment method only a few days old.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8c694b72-b0c4-4eb8-a234-1feac465034e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.78, "x": 0.11, "y": 0.77 }, "kind": "paragraph", "text": "Taobao also provides seller data analytics. Below is the sales data for the three sellers. Beijing Huahui Yunzhen is the kiosk we visited in Beijing. The Beijing NQ card distributor sells not just NQ products but also cell phone recharge cards. Of the prior six months’ 48 reported sales, only 11 sales were for NQ cards. NQ Card Agent’s Taobao year-to-date sales are only 348.5 RMB, approximately $57.13 (fifty seven dollars and thirteen cents). Performance at their sister company was equally dismal. The Guangzhou kiosk has not made a single sale on Taobao since April of this year.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c54b9362-27c6-4ac8-b948-c4ab248e1278", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.78, "x": 0.11, "y": 0.61 }, "kind": "paragraph", "text": "Taobao Marketplace is owned by Alibaba, and is a very large, reputable website in China similar to both Ebay and Amazon. It dominates China’s online B2C and C2C markets. We found only three sellers of NQ prepaid cards listed on Taobao Marketplace, and we believe two of these sites belong to the Beijing NQ Card Distributor. All three sites show meager sales at best. (Consistent with our view that the anonymous phone cards are not a Kosher business in China, there seem to be no NQ anonymous card sellers on Taobao.) One of the sellers, “NQ Card Agent” prominently displays a card with the old logo.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "dbdec457-e3cb-4333-8968-c8077c651dc6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.78, "x": 0.11, "y": 0.09 }, "kind": "paragraph", "text": "impression is that customer service gets few calls overall, and that calls about prepaid cards are far rarer. Investor relations had seemed willing to arrange appointments with purported vendors, but as any investor who was burned in companies such as China Biotics and China MediaExpress will attest, such prearranged meetings can easily be frauds as well. The investor responded by asking for names and contact information so that we could secretly shop the vendors. Investor relations has not responded.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "df972134-2241-4206-a854-34dca4db4444", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.25, "x": 0.11, "y": 0.93 }, "kind": "source-note", "text": "42 http://en.wikipedia.org/wiki/Taobao", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7ffe091d-12bf-4518-8f25-5f5579010396", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }