Momo, Inc. MOMO
Momo's 'blowout' live-video numbers hide a SAIC fraud charge, 123 undisclosed VIE subs, an illegal gambling site, and a fading KOL base — 30-50% downside to $23-$32.
Thesis
Spruce Point, backed by months of China-based forensic diligence and ~50 Mandarin interviews across the live-stream ecosystem, argues that $8bn Momo is a retail-owned momentum stock concealing severe red flags. In November 2017 the SAIC charged Momo's VIE with 'filing corporate information with intent to conceal the truth and falsify,' coinciding with three director resignations; Spruce Point also uncovered 9 undisclosed first-level and 114 undisclosed second-level VIE subsidiaries, two undisclosed talent agencies suggesting related-party dealings, and an illegal Pokermaster gambling operation tied to poker-playing CEO Tang Yan. Agencies report KOL flight (1,500 to 50 in five months), rising costs, and a 'sex cam' reputation that chokes advertising. Combined with insider sales of $2bn since IPO and the inflated $735m Tantan deal, Spruce Point models 13-15x P/E on cut forecasts, yielding a $23-$32 target (30-50% downside).
SCQA
Momo is an $8bn Nasdaq-listed Chinese mobile social and live-video platform trading near all-time highs on blowout Live Video growth, held mostly by U.S. retail investors via a VIE structure.
China-based forensic diligence uncovered a SAIC falsification charge, 123 undisclosed VIE subsidiaries, an illegal Pokermaster gambling site linked to the CEO, sham talent-agency accounting, and an overpriced Tantan acquisition — all masked by opaque FPI disclosure exemptions.
Investors should exit or short Momo; the Company's multiple should rerate to the 13-15x historical low and Live Video revenue forecasts should be cut to reflect KOL flight, agency fee pressure, and new content regulation.
Applying a 13-15x discounted P/E to Spruce Point's reduced FY18/19 EPS yields a $23-$32 price target versus $48.50, implying approximately 30% to 50% downside risk for short-sellers.
The three reasons
- 1
Chinese SAIC charged Momo VIE with 'filing corporate information with intent to conceal truth and falsify'
- 2
9 undisclosed first-level and 114 undisclosed second-level VIE subsidiaries, plus illegal Pokermaster gambling site
- 3
Live video growth peaking as agencies shift talent away; KOLs on Momo fell from 1,500 to 50 in 5 months
Primary demands
- Investors should short Momo; recommendation is Strong Sell
- Regulators should investigate undisclosed VIE subsidiaries, the Pokermaster gambling operation, and related-party talent agencies
- Deloitte audit of Momo VIE subsidiaries should be scrutinized given discrepancies with 20-F filings
KPIs cited
Pattern membership
Precedents cited
- China Integrated Energy (CBEH) — Spruce Point prior short, delisted by SEC
- Camelot Information Systems (CIS) — taken private 77% below Spruce Point initiation
- Ballard Power (BLDP) — 23% decline after Spruce Point China diligence
Composition what's on the 70 slides
Slide gallery ·
Notes
Spruce Point short report, 70 pages. Cover slide is unusually creative for the genre — a smartphone mockup with a hooded poker player and Chinese text, playing off 'Mo(mo) Money Mo(mo) Problems' Biggie reference and CEO Tang Yan's gambling reputation. Body slides are standard Spruce Point template (teal header bar, dense bullets, institutional blue palette) — functional but not editorial-tier. Heavy use of forensic corroboration: ~50 Mandarin interviews, SAIC filings, Form 144 tracking. Classic short-seller playbook combining fraud-exposure (SAIC charge, undisclosed subs, Pokermaster, related-party talent agencies) with fundamental derate (KOL flight, agency fee pressure, regulation). Stake % not disclosed but disclaimer confirms short position. CEO quote contradictions drawn from Q2'17/Q3'17/Q4'17 earnings calls on live-streaming positioning and marketing spend.