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  "docSlug": "86dfa89096f8",
  "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": 38,
  "pageCount": 70,
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  "density": "overcrowded",
  "nDataPoints": 12,
  "notes": "The slide uses red circles and lines to visually connect the conflicting share counts (22,272,730) attributed to both Matrix and Purple Sky.",
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      "text": "Based on stock sale transactions and IPO filings, it appears as though both Matrix and Purple Sky owned the entirety of Momo’s A-1 preferred shares. This is irreconcilable and suggests that one or both vehicles may have been used to enrich Momo insiders prior to the IPO.",
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      "text": "Momo’s IPO prospectus in the section “History of Securities Issuance” states that preferred shares were first issued to Matrix and “an individual investor” on April 18th, 2012. The “individual investor” is not shy, Zheng Gang of Purple Sky has identified himself as that investor but claims he put up 49% of the money himself and his Purple Sky limited partners put up the other 51%",
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      "kind": "list",
      "text": "According to the SAIC company registration, Purple Sky became an investor in Momo VIE on May 29th, 2012 before the date indicated in the IPO documents and that would mean that the investment was made inside China and the payments for those shares when sold were made outside of China",
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      "text": "The IPO prospectus states on the April 18th, 2012 the 22,272,730 Series A-1 preferred shares were issued to Matrix and Purple Sky/Zheng Gang. The split between the two was not stated. The two paid $1 million for the shares on a valuation of $10 million and owned approximately 10% of Momo Inc. after the Series A-1 round",
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      "kind": "list",
      "text": "Matrix was a shareholder at the time of the IPO in December 2014 having 65,970,897 shares. 22,272,730 of those shares were issued to Matrix in the Series A-1 financing. This would indicate that Matrix got all the shares and Purple Sky none",
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      "kind": "list",
      "text": "We estimate that Purple Sky provided Momo around $560,000 to $630,000 in financing in April/May 2012 and eventually sold its shares for a total of $36.5m, a return of between 58x to 65x",
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      "kind": "metric",
      "text": "share count: 22,272,730",
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      "kind": "paragraph",
      "text": "Based on stock sale transactions and IPO filings, it appears as though both Matrix and Purple Sky owned the entirety of Momo’s A-1 preferred shares. This is irreconcilable and suggests that one or both vehicles may have been used to enrich Momo insiders prior to the IPO.",
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      "kind": "table",
      "text": "Purple Sky Stock Sale Transactions: July 2012 (Alibaba, 4,894,500, $1.4), Jan 2013 (Alibaba, 10,079,373, $4.3), May 15, 2014 (Momo, 7,298,857*, $30.8). Total: 22,272,730, $36.5",
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      "kind": "title",
      "text": "Red Flag 5: Does The Strange Addition of LPs In The Tantan VIE Structure Have Precedence From Momo Pre-IPO Transactions?",
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      "evidence": "Slides 7-69 systematically expose contradictions and red flags in Momo's business, including undisclosed charges, complex VIE structure, and regulatory risks.",
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