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  "documentTitle": "Momo, Inc. (MOMO)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Ben Axler",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2018-06-27 00:00:00",
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  "pageNumber": 36,
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  "notes": "Uses quotes from earnings calls to highlight management's lack of integration plans and analyst skepticism.",
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      "kind": "callout",
      "text": "The strategic acquisition rationale for Tantan, a dating app in China, appears limited to user base expansion given that operations between Tantan and Momo are to remain almost entirely distinct. Given this fact, and the premium paid to recent private funding rounds, the acquisition seems extremely expensive for client acquisition or speculation.",
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      "kind": "callout",
      "text": "We believe the Tantan acquisition was likely done to cover up slowing growth that started in Q2'17",
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      "text": "On February 23rd, Momo announced that it would acquire Tantan for $735 million of which $600.9 million would be in cash and 5.3 million A class ordinary shares. According to QuestMobile and Iresearch Tantan had only 20 million active monthly users at the start of the year. From the neighboring table, we see that Tantan had no revenue in 2015 and 2016, but more importantly there was very little activity in the Tantan VIE. Tantan is a small company that only started to charge subscription in Q3 2017 and premium VIP service in January 2018 (source). During the Q1 2018 earnings call, management guided towards only $4.5 million in revenue for the month of June 2018",
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      "kind": "quote",
      "text": "\"With one section of the cash to invest or to buy Tantan, almost a management buyout, so how do you incentivize the funding management team to continue to work partly, that's number one. Number two is Tantan working independently, how is the potential synergy between Momo and Tantan can be realized?\" – Analyst Tian Hou Q4 2017 Earnings Call",
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      "kind": "quote",
      "text": "\"After the acquisition process, Tantan will maintain its separate sets of strategies and product development, operations, branding as well as business development under the leadership of their existing management, and we will be providing full support and expertise in areas including human resources, technology as well as monetization.\" – Tang Yan Q4 2017 Earning Call",
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      "text": "\"After the acquisition process, Tantan will maintain its separate sets of strategies and product development, operations, branding as well as business development under the leadership of their existing management, and we will be providing full support and expertise in areas including human resources, technology as well as monetization.\" — Tang Yan Q4 2017 Earning Call",
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      "kind": "source-note",
      "text": "Source: China financials",
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      "text": "Tantan VIE Financial Results",
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      "kind": "title",
      "text": "Red Flag 5: Making Sense of The Tantan Deal",
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      "evidence": "Contrasting management's claim of independence with the analyst's question about synergy.",
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