24/7 Wall St.

Rumor About Ubiquiti Networks Appears To Be False…

Editor’s Note: 24/7 Wall St. has received new information regarding the allegations about Ubiquiti Networks Inc. (NASDAQ: UBNT) from representatives of the company related to a report from a Chinese website claiming a connection between the “Chinese mafia” and the company. The original report used for our article has been removed from the web site and is no longer available. The company has requested a retraction on this matter which we wish to address.

Ubiquiti issued the following release on Thursday morning:

Ubiquiti Networks, Inc. (Nasdaq: UBNT), a next-generation communications technology company reiterated with its customers the discovery of counterfeit products on the market and launched a worldwide campaign to aggressively defend its intellectual property and protect its customers.

The company believes that as a result of the effectiveness of its campaign, it has become subject to malicious and false accusations posted on overseas websites by those infringing on its intellectual property, and these false accusations have subsequently been reposted by unwary media outlets and news aggregators.

“While we do not normally comment on rumors, we take our business reputation very seriously and strive to conduct all of our activities in compliance with the law,” said Jessica Zhou, General Counsel and Vice President of Legal Affairs of the company, “Our worldwide intellectual property protection efforts demonstrate that we take our customers’ interest to heart and that we remain firmly committed to being a technology leader.”

24/7 Wall St. was contacted today by representatives of Ubiquiti Networks who pointed out this situation as false and damaging. We noted in our article that the basis for this nasty situation was a report out of China, which we can now see has been removed from that site. We also concluded in our original article, “Whether or not Ubiquiti has made its competitors an offer that can’t be refused will be proved or disproved at some point.”

This stock was already down over 16% at $29.31 when we published our story.  What is perhaps the most sad issue about this situation is that Ubiquity shares, despite the company defending itself in a press release, did not recover from the sell-off which took shares from $35.00 on Tuesday down to $28.90 on Wednesday and down another $0.12 on Thursday to $28.78. This is one of those unfortunate situations where what is true and what is false when it comes out of China is not exactly clear.

Ubiquiti Networks issued another press release after the close on Thursday noting that its CFO plans to present at the JMP Securities Research Conference on Monday, May 14, 2012.

Forbes has also issued an update to their original story.

-The 24/7 Wall St. Team

Our original article from 2:29 PM EST on May 2, 2012:

In the great scheme of things, wireless communications company Ubiquiti Networks Inc. (NASDAQ: UBNT) is pretty small, with a market cap of around $3 billion before today’s debacle. That puts the company in the same league as MetroPCS Communications Inc. (NYSE: PCS) and United States Cellular Corp. (NYSE: USM), although Ubiquiti does not operate as a carrier but as an equipment maker.

A report at a Chinese website claims that Ubiquiti’s CEO is under investigation for allegations of sending “[C]hinese mafia to [competitors’] factories to intimidate and harass and threatening them to stop trying to produce technology that are competition to [Ubiquiti].”

The report continues:

Using mafia to solve commercial dispute, collect due payments is a common patter with Chinese small size companies. However, it is very unusual for a public listed American company to use this kind of method to stop the competition. If these accusations are proven right it could be a very serious problem for this young company and its CEO. … The company has faced legal trademark problems in many countries, as they did not register their trademark in most of the countries worldwide. The lack of respect for international laws and the fact that their sold products to countries under trade sanctions such as Iran brought them many legal problem before.

You can’t make this stuff up.

Oh, and by the way, Ubiquiti reported better-than-expected EPS and revenues yesterday, and forecast the next quarter in-line with expectations. But who cares — we’re talking about the Chinese mafia here.

Whether or not Ubiquiti has made its competitors an offer that can’t be refused will be proved or disproved at some point. But shares are taking a beating today, down more than -16% at $29.31 in a 52-week range of $16.25-$35.99.

Paul Ausick

A Google cache of the original story appears here.