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PricewaterhouseCoopers Expands Audit of NQ Mobile

  +Follow July 3, 2014 10:53AM
Tickers Mentioned:

PricewaterhouseCoopers, NQ mobile stock, NetQin mobile stock, china stocks, fraud, audit

Shares of NQ Mobile (NQ) fell nearly 30 percent in the shortened pre-holiday July 3 trading day after PricewaterhouseCoopers announced they were expanding their fraud investigation into alleged securities fraud on the part of the Chinese software company.

Of particular interest to shareholders of the company were hints that NQ is not cooperating with external investigators. In the midst of the investigation NQ both suddenly replaced the chair of the audit committee and reportedly stalled on requests from PricewaterhouseCoopers for more detailed information on their financials.

And still, NQ has failed to provide its 2013 fiscal year financial report. All this adds up to increased ammunition for NQ’s army of cynics, who have called this company an outright fraud since last fall.

Short Getting Deeper

The major accusation against NQ originate from famed short seller Muddy Waters, who have long stood by accusations that the company is almost certainly a house of cards built on fabricated user numbers and greatly exaggerated revenues.

A subsequent audit commissioned by NQ found no discrepancies that indicated fraud, sending shares into recovery mode. A major deal with Sprint (S) to incorporate NQ software into Sprint phones galvanized the company’s supporters, and gave credence to counter-accusations that Muddy Water’s campaign against NQ was simply a case of a short-seller trying to capitalize on a resulting equity sell-off.

That first audit, undertaken by Deloitte, did little to convince the investors who took bearish bets against NQ. Carson Block, the brains behind Muddy Waters, stuck steadfastly to his opinion that the company was primed for complete collapse. According to Block, the Deloitte exoneration (conducted in conjunction with NQ directors) was just another scam, and he told Reuters that the Deloitte audit was “just another in a long line of whitewashes carried out by China companies that are defrauding U.S. investors, written by directors in China who have no accountability to U.S. authorities."

Since Block’s salvo, the short float on NQ – which was already sizable – has metastasized. On May 30, the portion of shares bet against the company stood at 44.33%. On July 3, that number had grown to 48.97%, making NQ the most heavily shorted stock in the entire Tech sector.

Are NQ Investors Masochists?

So what keeps investors coming back to NQ? The company certainly has its legitimate backers, counting both Sprint and Samsung (SSNLF) as partners. The allure of potential profits to be made from contrarianism also helps considerably. If such a large percentage of investors are shorting the stock the share price could get squeezed up – that is, if the calls expire before auditors fail to uncover fraud in time, either via NQ’s stalling or (possibly) because there is no fraud to uncover.

Either way the price action of NQ, which sports substantially higher volume than should be expected of a small-cap tech play, should remain highly interesting for the foreseeable future, as either the bulls or the bears get rich on this battleground stock.  

As the July 3 half trading concluded, shares of NQ Mobile had fallen 32.25 percent to hit $4.58 a share. The company's stock has fallen 57.91% on the year.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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Results for NQ
Stock Trade Alerts
7 Jul 15 10:17:40
contrarian on China ADR 'going private' deals: $QIHU $MOMO $WBAI $NQ $AMCN $BONA $CEDU $NQ $CNIT… http://t.co/bWQ0Hj3Y8Q ~ via @AlertTrade
7 Jul 15 10:07:18
P. Ricatti
7 Jul 15 09:33:00
RT @Street_Insider: contrarian on China ADR 'going private' deals: $QIHU $MOMO $WBAI $NQ $AMCN $BONA $CEDU $NQ $CNIT $CO $PWRD $RENN http:/…
7 Jul 15 09:30:21
contrarian on China ADR 'going private' deals: $QIHU $MOMO $WBAI $NQ $AMCN $BONA $CEDU $NQ $CNIT $CO $PWRD $RENN http://t.co/OfYTlCpM2W
7 Jul 15 09:15:18
StockTwits Trending Alert: Trading recent interest in NQ MOBILE $NQ http://t.co/dtdwA6xLRJ
7 Jul 15 09:09:46
$NQ #China #stocks 7%GDP,ratecuts,IPOhalts,boostforeignstockownership&marginleverage, won't fix SystemicMinionProblem http://t.co/oexCrUJa2V
7 Jul 15 08:51:48
$NQ here she bouncing 3.95
Clever Hedge
7 Jul 15 08:45:47
$NQ free falling into the bottomless pit
Jake Dakota
7 Jul 15 08:45:17
What is the Chinese version of Hari Kari? #China #chinastocks $wbai $nq $dang $xnet
Jeff Greenblatt
7 Jul 15 08:42:43
$nq just wasted a perfectly timed 618dg bounce point this is getting serious
7 Jul 15 08:41:49
China stocks getting incinerated. $CYOU $JD $ACH $BITA $NQ $WBAI $JMEI $DANG $FXI
Wall Street
7 Jul 15 08:35:37
The Penny Stock Superstar team voted #1 OTC trading group. http://t.co/cQ0lLTokka Related: $WSTI $NQ $GEVO $GNW $WIN $FCEL
Mustango Trading
7 Jul 15 08:31:47
$NQ very much!!!
Sludge Reports
7 Jul 15 08:27:07
$NQ has no bottom now. No news, no old longs tryin 2 force a pump, no buybacks, no deal yet. Some1 reply 2 me that ur buying...
Alexander Morris
7 Jul 15 08:27:04
$NQ: Waterfall-:3 [-27%,3%offLo], PrvCLo-, FltBO-, 3mMv:-3, 12:6Accel-, tf:1000000; TrdVol:5x:5x; TLM:8.7; ILM:1.7, Gap-[-2.3%],
NewsHedge Squawk
7 Jul 15 08:18:06
$NQ spiked lower on very heavy trading volume. http://t.co/SrmXmmbGJ6
7 Jul 15 08:16:49
$NQ cheap & deap...3.90
7 Jul 15 08:15:06
RT @BookMapXray: Of Interest: $ES $NQ $YM $TF $ZB Blog Post: WealthandCapitalMarketsBlog: A vital utility in the OTC derivatives in… http:/…
Jim Harrison
7 Jul 15 08:12:48
Of Interest: $ES $NQ $YM $TF $ZB Blog Post: WealthandCapitalMarketsBlog: A vital utility in the OTC derivatives in… http://t.co/zRpL1z4gXu
7 Jul 15 08:10:05
RT @JorelLaraKalel: Chinese tech stocks crater $ATHM $BITA $CMCM $CMGE $CTRP $CYOU $DANG $DSKY $EJ $LONG $MOMO $NQ $NTES $QIHU $VIPS $YY ht…
7 Jul 15 08:08:36
@DougKass why do you trade smaller products $SPY & $QQQ instead of bigger $SPX $ES $NDX $NQ?
Wall Street
7 Jul 15 08:00:36
The Penny Stock Superstar team voted #1 OTC trading group. http://t.co/cQ0lLTokka Related: $WSTI $NQ $GEVO $GNW $WIN $FCEL
Clark Joseph Kent
7 Jul 15 07:57:18
Chinese tech stocks crater $ATHM $BITA $CMCM $CMGE $CTRP $CYOU $DANG $DSKY $EJ $LONG $MOMO $NQ $NTES $QIHU $VIPS $YY http://t.co/PPU8TqtmyX
Mark Trader
7 Jul 15 07:48:51
100% non-compensated picks at http://t.co/R6BGOmTldH. That is awesome. Related: $RXII $NQ $AKS $ICLD $CTIC $VMEM $PMCB
Sludge Reports
7 Jul 15 07:45:52
$NQ there goes NQ again! Didja sell the pop to $6 like I said to weeks ago? Is Selby pumping or suing? Haven't kept track of him lately.
Brian Bolan
7 Jul 15 07:37:37
$NQ getting killed.... $ASHR down 10%
Trader Daily
7 Jul 15 07:18:35
NQ Mobile $NQ Stock: Weak On High Volume Today $NQ http://t.co/7oXDRYy6Km
7 Jul 15 07:18:07
$nq obliterated
7 Jul 15 07:15:42
Large Void Bot
7 Jul 15 07:14:12
10:14 Drops: $NQ -5.0%
Nathan Michaud
7 Jul 15 07:11:50
About that $AMCN ... talk about getting $NQ'd
Oregon Trader 503
7 Jul 15 07:04:32
Ouch $NQ. Ouch.
7 Jul 15 06:55:12
XLI Industrials Select Sector SPDR Dividend http://t.co/lAdsBxsL3x $XLI $SHAK $AGEN $NQ #XLI #tradeideas #stock
Tristan MArroquin
7 Jul 15 06:49:13
$es_F $TF $NQ $SPY $SPX $QQQ Market is bearish atm but if you look at internals it's not that bearish be careful
7 Jul 15 06:48:46
TNA Direxion Daily Small Cap Bull 3x Shares E.P.S. http://t.co/qj1OEdNjbm $TNA $MO $PPCH $NQ #TNA #stock #share
Lucky Jimmy
7 Jul 15 06:47:42
UNG United States Natural Gas Fund Stock Forum http://t.co/L8mmIguVwn $UNG $NQ $SLV $UGAZ #UNG #stockmarket #investing
Olivier Bamert, CMT
7 Jul 15 06:46:31
4404 - 4396 Buy Limits Filled ************ Stop Adjusted 4380 ************ #NASDAQ $NQ
Stock Forums
7 Jul 15 06:45:08
SLTD Solar3D, Inc. Volume http://t.co/f25XUgshos $SLTD $NQ $TNA $LVGI #SLTD #tradeideas #stock
7 Jul 15 06:42:37
NQ NetQin Mobile Inc. E.P.S. http://t.co/1bX9YVCon2 $NQ $EA $UCO $SCO #NQ #share #stocks
7 Jul 15 06:42:13
NQ NetQin Mobile Inc. Message Board Posts http://t.co/6upBbDtUpt $NQ $UPRO $SLW $HND.TO #NQ #stock #stocks
Rosner Stocks
7 Jul 15 06:42:10
NQ NetQin Mobile Inc. Yield http://t.co/FQHNBhuxwh $NQ $ETRM $AMBA $ZIOP #NQ #finance #invest
Rosner Stocks
7 Jul 15 06:42:09
NQ NetQin Mobile Inc. Day High http://t.co/mEGsZtHY28 $NQ $HGD.TO $GLD $LULU #NQ #share #finance
Lucky Jimmy
7 Jul 15 06:42:05
NFLX Netflix, Inc. Volume http://t.co/K9uksIdFFh $NFLX $NQ $FSLR $SH #NFLX #pennystocks #tradeideas
Investors Hangout
7 Jul 15 06:41:26
MDY SPDR S&P MidCap 400 Bid Size http://t.co/M7npVcqrwF $MDY $NQ $MCD $NUGT #MDY #investing #investing
7 Jul 15 06:38:35
HND.TO Horizons BetaPro NYMEX Natural Gas Bear Plus ETF Short Sales http://t.co/L9JusC18mg $HND.TO $NQ $AGN $VXX #HND.TO #investing…
7 Jul 15 06:38:20
GS Goldman Sachs Group, Inc. Volume http://t.co/QWhmRmxQlX $GS $NQ $YINN $MOM.V #GS #pennystocks #share
Stock Forums
7 Jul 15 06:38:16
GEVO Gevo Inc. Open http://t.co/3aImonwGcu $GEVO $ABOT $INTC $NQ #GEVO #stockmarket #invest
7 Jul 15 06:36:37
FTNT Fortinet Inc. Day Low http://t.co/KaHUkc9dvG $FTNT $NQ $AGEN $MHYS #FTNT #tradeideas #stocks
7 Jul 15 06:36:16
FEYE FireEye Inc. Quotes http://t.co/b5fI25iktM $FEYE $NQ $NQ $FNMA #FEYE #invest #finance
7 Jul 15 06:36:09
FEYE FireEye Inc. Quotes http://t.co/un7HSDQnsg $FEYE $NQ $NQ $FNMA #FEYE #invest #finance
  +Follow July 3, 2014 10:53AM



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