Why China Mobile Games & Entertainment Stock Popped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of China Mobile Games & Entertainment Group Ltd (NASDAQ: CMGE  ) rose more than 10% Thursday after the company denied recent allegations of bribery.

So what: Last week, China Mobile Games shares plunged by as much as 25% following reports the company had removed nine executives allegedly involved in bribery within its game-publishing unit. As a result, the Nasdaq OMX Group halted China Mobile Games' shares pending a request for additional information.

In a press release today, however, China Mobile Games insisted it is "currently unaware of any evidence of bribery." In addition, it elaborated, "[...] there was an implementation of organizational restructuring and personnel changes in its game publishing business, [the purpose of which] is to streamline the Company's operations to better position it for profitable long-term growth."

With this in mind, and in order to "provide the highest level of transparency to its shareholders," China Mobile Games has formed an independent committee to "look into and address" the allegations of bribery.

Now what: That seems fair enough, and I certainly wouldn't hold my breath for the independent committee to come back and contradict the company's claims. But to be honest, I would have applauded China Mobile Games had it actually ousted the execs for bribery. In the end, though, you can bet that leery investors will still keep a skeptical eye on China Mobile Games going forward -- especially given past cases of pervasive fraud with U.S.-listed Chinese companies. For now, though the storm may have passed, I'm perfectly happy putting my money to work elsewhere.

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11/21/2014 4:00 PM
CMGE $25.21 Up +0.46 +1.86%
China Mobile Games… CAPS Rating: *

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