Friday, 25 October 2013

Short seller Muddy Waters targets NQ Mobile

Article on Dealbook's website:

After Muddy Waters Report, NQ Mobile Falls by Half

When the stock market opened on Thursday, NQ Mobile, a Chinese mobile security company, had a valuation of $1.1 billion. Just hours later, half of its value was erased.

Call it the Muddy Waters effect. A short-selling firm known for its scathing reports on Chinese companies, Muddy Waters released a harsh assessment of NQ Mobile on Thursday, calling it a “massive fraud.”

NQ Mobile immediately experienced a stomach-turning plunge, with its shares falling more than 50 percent. The stock, which opened the day at $23 a share, fell as low as $8.46 before recovering slightly to close at $12.09. The company is listed on the New York Stock Exchange.

In its research note, Muddy Waters argued that “at least 72 percent of NQ’s purported 2012 China security revenue is fictitious,” saying the company was a “zero.”

“NQ’s largest customer by far is really NQ,” Muddy Waters, which is run by Carson C. Block, said. The note added that the company’s “future is as bleak as its past,” and that its “acquisitions are highly likely to be corrupt.”

In a statement, NQ said the accusations were “false,” adding that it would issue a more detailed response before the market opens in the United States on Friday.

“NQ Mobile will respond quickly, transparently and forcefully to these false allegations regarding our company,” the statement said.
Muddy Water's report can be found here.

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