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NQ Mobile: Questionable FL Mobile Divestment Now Seems Even More Dubious


Since 2014 there has been various different deals announced by NQ to sell their FL Mobile subsidiary.

However none of the deals has ever really closed. Instead they get replaced by new deals to sell FL Mobile.

New reported regulations by the China Securities Regulatory Commission makes the chance of success for the latest FL Mobile deal seem even more dubious than before.

For those following NQ Mobile (NYSE:NQ) every year since 2014 there always seems to be some sort of deal or pending deal to sell at least a part of FL Mobile, their mobile game publishing subsidiary. However none of these deals has ever really closed in the end. Instead they get replaced by some sort of new deal for FL Mobile with a new higher purported valuation than before. Now new reported regulations by the China Securities Regulatory Commission makes the latest iterations of the FL Mobile deal seem even more dubious.

The History of FL Mobile Deals

First though let's go over the history of the various FL Mobiles deals announced by NQ Mobile for those unfamiliar with them.

The first FL Mobile deal began in May 2014 when NQ sold a small 5% stake of FL Mobile to Bison Capital and others parties giving it a "post-money valuation of $425 million." However this stake sale comes with a redemption right. If "FL Mobile Inc. does not complete a qualified listing within 12 months after the share purchase is completed" then the buyers can make NQ Mobile repurchase the stake and get their cash back.

The redemption right was utilized as disclosed in NQ Mobile's 2015 annual report. Bison Mobile Limited and Treasure Getter Limited used the redemption right and was paid $17.8 million back in exchange for the FL Mobile stake they bought in 2014. So in the end this deal pretty much ended up nowhere.

Next in December 2014 NQ Mobile then announced they were selling FL Mobile to an apparel company listed in Hong Kong called Tack Fiori for equity valued between "US$570 million and US$630 million".

However nine months later the deal with Tack Fiori was cancelled in August 2015 and instead NQ Mobile announced a "binding framework agreement" where they are now selling FL Mobile to Beijing Jinxing Rongda Investment Management for "no less than RMB 4 billion (or approximately no less than US $626 million)".

Six months after the announcement in February 2016, NQ Mobile released an update stating they selling FL Mobile to a listed Chinese wine company called Gansu Huangtai Wine-Marketing. However this new deal with Gansu Huangtai Wine was quickly terminated just three weeks later on March 14, 2016 for undisclosed...