Shares of Momo Inc. (Nasdaq: MOMO), a mobile social networking app, dropped more than 4 percent today to close at $31.69 per share in New York after the company got slapped by famous economist Anne Stevenson-Yang from J Capital at the Kase Learning Short-Selling Conference.
At the brief speech titled "The Link Between Chinese Online Streaming Sites and Money Laundering: BILI, HUYA, MOMO", Stevenson-Yang argued that Momo tried to exemplify "virtual revenues" by using a approach which is commonly used for money-laundry. According to her research, as much as 40 percent of Momo's strong revenue growth is driven by customers who pay the company but get some 75 to 100 percent of the cash back.
"Meanwhile the company is painting a picture of growing monthly active users and growth potential," according to Seeking alpha, whereas Stevenson-Yang believed "Momo'sMAUs peaked a year ago and the company faces a crowded industry along with high political risk and massive insider selling."
Stevenson-Yang co-founded J Capital Research in late 2010 and is J Capital’s Research Director. She has 25 years industry experience in China as an industry analyst and trade advocate. J Capital conducts deepdive primary research into listed companies in emerging markets and into the Chinese economy.
In June, the Tinder-like app was hit by short-seller, Spruce Point Capital Management LLC. Spruce Point, after months of doing "primary forensic research", released a 70-page research titled "Mo(mo) Money Mo(mo) Problems" on the Momo, claiming investments into Momo carried "serious risks." It also alleged that Momo had ties to a popular illegal gambling platform, Pokermaster, that was shut down in February.
Momo vehemently denied all accusation and said the short seller's report contained "numerous errors, unsubstantiated statements, and misleading conclusions and interpretations regarding events relating to the company."
Since the report was published in June, the stock of Momo dropped nearly 30 percent.