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  "documentTitle": "Momo, Inc. (MOMO)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Ben Axler",
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  "sourceTypeLabel": "Short seller",
  "presentationDate": "2018-06-27 00:00:00",
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  "notes": "This is a classic activist short-seller thesis slide framing the 'problem' as a lack of proper diligence by retail investors.",
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      "text": "Anything short of this is simply a gamble",
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      "text": "Additionally, if Momo were a North American based company, investors could take confidence in the fact its activities are likely to be transparently disclosed, fairly presented, legal and that management is acting in the best interest of shareholders",
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      "text": "When making a Chinese based VIE investment, the emphasis placed on performing forensic research into governance, ownership, the legality of operations and related party transactions takes on much greater importance than a comparable North American investment given different corporate governance practices in China. Spruce Point doesn’t believe that an appreciation for the risks of a Chinese VIE based investment can be achieved without thorough diligence of the VIE structure and its subsidiaries",
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      "text": "Momo’s current investor base is primarily comprised of U.S. retail investors and a select number of institutions, almost exclusively in small position sizes, looking to play the recently white hot China live streaming space through one of a handful of US listed companies",
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      "text": "If Momo were simply a North American based company selling a new technology (e.g., VR, AI), investors could conduct significant English based market research, evaluate the product, understand the regulatory environment and make an educated assessment as to whether this is a fad or the next big thing. However, given the newness of the product space and the evolving nature of the competitive landscape it would still remain a speculative investment",
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      "text": "Unfortunately, Momo isn’t a North American based company and this compounds the risk of an investment substantially. Momo is a China based media company, offering a Mandarin based product to Chinese consumers and conducting business under the oversight of the MOC and SARFT. In order to credibly understand trends in this foreign market, an investor must conduct the same level of company, industry and regulatory diligence in Mandarin that one would conduct in English. Anything short of this is simply a gamble",
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      "text": "The diligence and risk potential of a China based investment operating under a VIE structure is materially different from a comparable North American investment, and Chinese investments outside of a VIE structure. As a result, a diligence process focused on conducting forensic financial analysis is a necessity.",
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      "kind": "title",
      "text": "Framing The Diligence Challenges And Risks of A Momo Investment",
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