Saturday 22 November 2014

MOL Global's share price crashes 54%

MOL Global's share price tanked 54% to USD 4.09 after it announced that its CFO (who only joined three months ago) resigned and the company would postpone its quarterly results, both known red flags.

From Barron's Asia:

Malaysia-based Internet gaming services firm MOL Global (MOLG) said it would postpone its planned third-quarter results from today to Wednesday, December 3. This would be MOL Global’s first earnings call as a public company and the stock has risen over 10% since it went public a month ago in New York.

MOL Global also said its CFO Allan Wong decided to resign for “personal reasons.” Wong only joined MOL Global in August 2014. Jonathan Yoon, currently CFO of one of MOL Global’s business segments, will assume the post.

This is unfortunate timing for Deutsche Bank which just started their coverage with a Buy rating and a price target of $12. MOL closed at $8.86 on Thursday.

The bank analysts Alan Hellawell III and Vivian Hao rushed out a follow-up after the announcement, stepping back from their bullish calls:

MOL, as a relatively small company which spans more than 13 markets, could suffer from poor internal reporting systems, rendering a representation of the business challenging until the actual closing of books at the end of reporting periods. We also note that MOL, with 454 employees, has undertaken no less than 10 investment and acquisitions in five countries since 2009.

Reconciling differences in accounting standards across markets can be a real headache.

The US is a difficult country to list in, with tough laws and "hungry" lawyers. It seems the last category is indeed already on the prowl. How serious that is, I don't know at this moment, we first have to wait for the quarterly results.

MOL Global has come down a lot (67%) since its listing at USD 12.50 per share. One interesting paragraph from its prospectus under "Risk Factors":

You should not consider or rely on statements made by our major shareholder that appeared in a news report in June 2014.

In an article in The Business Times, a Singapore-based newspaper, dated June 23, 2014, information regarding us and this offering was published. This article quoted statements that were made by our major shareholder, Tan Sri Dato’ Seri Vincent Tan, to a reporter, during an interview relating to matters unrelated to us or this offering, and were published without his consent. These statements were also not made with the knowledge or consent of us or our directors, officers or employees. The article referred to statements by our major shareholder regarding the expected timing of our initial public offering and our projected market capitalization and value of our company. Portions of the article were republished by other news agencies.

These statements regarding market capitalization and value by our major shareholder were not based on any methodology, calculations or analysis undertaken by us or, we understand, our major shareholder. We understand these were informal, speculative statements made by our major shareholder that were not expected by him to become public. These statements should not be relied upon for any purpose whatsoever. We are unable to accurately project our market capitalization or the value of our Company because these will be based on many factors beyond our control. You should carefully evaluate all the information in this prospectus, including the risks described in this section and throughout the prospectus. You should only rely on the information contained in this prospectus in making your investment decision.

Neither we nor any of the underwriters in this offering, nor any of our or their respective affiliates, have confirmed, endorsed or adopted any of the information reported in the news articles referred to above, and all such information is disclaimed by us and the underwriters and our and their respective affiliates. Accordingly, prospective investors should not rely on any such statements or information in such news reports.

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