LOS ANGELES—Mobile virtual network operator Xero Mobile has yet to launch, but the company already is facing an investigation of its business by the Securities and Exchange Commission.
The MVNO announced late Friday that it had been notified by a local office of the SEC that the agency “was conducting an informal inquiry relating to certain aspects of the company’s business.”
Xero Mobile added that it is “unaware of the reason for the request” and was not required to give the SEC any information, but the MVNO has opted to cooperate with the government agency.
Xero wants to launch service this fall and target college students with several million free “high-specification handsets without contract and at notably competitive prices,” according to the company. The MVNO plans to offer an ad-supported wireless service. Under the offering, Xero Mobile customers will receive several video ads on their handset each day, which will earn them free airtime.
Xero Mobile went public in April by going through a reverse merger. Some of its founders were associated with Gizmondo, a European gaming company that filed for bankruptcy in January. Gizmondo had tried using ads to offset the price of its handheld gaming device.
Xero Mobile shares closed at 29 cents Friday on the Over-the-Counter Pink Sheets, and were trading down about 20 percent in midday trading Monday.
