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PricewaterhouseCoopers Expands Audit of NQ Mobile

  +Follow July 3, 2014 10:53AM
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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.


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Results for NQ
Tom Williams
19 Dec 14 14:39:35
$NQ finally down where It belongs
yxiaotian
19 Dec 14 14:36:00
RT @unemon1: $NQ goes China Style 10^1000000... Even Dickson Lee at $LLEN wouldn't have been so arrogant! http://t.co/TocBrzZXCf
SmallCaps
19 Dec 14 14:31:10
http://t.co/7cnaGTmDi4 <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $NQ $CSIQ $LVS $LNCO
Dr. Dani Babb
19 Dec 14 14:25:16
RT @codywillard: $NQ Mobile "Stock Plummeting Today After Disappointing Third Quarter Earnings Loss Fri Dec 19 2014" I've been ... http://t…
Russell Barbour
19 Dec 14 14:24:18
http://t.co/fmOyM2OPtD <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $NQ $CSIQ $LVS $LNCO
RealTrader Network
19 Dec 14 14:08:40
RT @unemon1: $NQ goes China Style 10^1000000... Even Dickson Lee at $LLEN wouldn't have been so arrogant! http://t.co/TocBrzZXCf
Cody Willard
19 Dec 14 14:04:30
$NQ Mobile "Stock Plummeting Today After Disappointing Third Quarter Earnings Loss Fri Dec 19 2014" I've been ... http://t.co/UeCYIkdRbP
unemon
19 Dec 14 14:04:08
$NQ goes China Style 10^1000000... Even Dickson Lee at $LLEN wouldn't have been so arrogant! http://t.co/TocBrzZXCf
Quantheta
19 Dec 14 13:59:55
#TOPTICKERTWEETS $SPY $BBRY $AAPL $QQQ $IWM $DIA $FB $UPIP $SPX $NQ #quantheta #sentiquant 20141219 17:00:29:460
Dan
19 Dec 14 13:15:36
$NQ OI for maturity 12/20/2014. 10.00 Highest put. 7.00 Highest call. http://t.co/g9oczvjJUS
Day Trade Alerts
19 Dec 14 13:05:39
#GazerAlerts Alert results: $IMGN +2% $NQ +13% | via http://t.co/LQqutRgraR
Jeff C Brook
19 Dec 14 13:03:05
$NQ daily volume flipped to the downside on close
Stock Horizon LLC
19 Dec 14 13:00:07
Alert results: http://t.co/wqiMjrvcM1 $IMGN +2% $NQ +13%
ProTradersNews
19 Dec 14 12:48:02
$NQ: NQ Mobile proposes sale of FL Mobile to Tack Fiori International ... http://t.co/BiUPR8QVg7 http://t.co/12txoWLEsS
Maleah
19 Dec 14 12:46:13
http://t.co/pcuLzxkHBP <- A decent informational video from millionaire trader Tim Sykes $NQ $PAY $USO $BA $RSX $CLDX
Dave
19 Dec 14 12:41:45
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $ISCO $MRVL $GLUU $NQ $IDTI
Jim Harrison
19 Dec 14 12:25:10
Of Interest: $ES $NQ $YM $TF $ZB ESMA Publishes Report on High-Frequency Trading Activity in EU Equity Markets -... http://t.co/gw7ync2274
Lewis Mazzotta
19 Dec 14 12:20:20
@ACInvestorBlog R U Still holdinf $NQ ?
BNK Invest
19 Dec 14 12:18:30
Video: Friday's ETF with Unusual Volume: $GXC $NQ $VIPS $SOL #stocks http://t.co/Xd2dTqrxaK
Yas Nahali
19 Dec 14 12:18:06
RT @QuoththeRavenSA: The $NQ call summed up. @muddywatersre @Keubiko http://t.co/LRSiZzIPVA
Keubiko
19 Dec 14 12:17:53
Meanwhile in $NQ's Dallas office... @muddywatersre @QuoththeRavenSA @applengineer http://t.co/Iaoi0BUfCy
Antonio Costa
19 Dec 14 12:15:50
$NQ is starting to bounce... smart money buying/covering b4 the close?
TraderBrain.com
19 Dec 14 12:10:22
$nq possible retest of 5 year low http://t.co/WG7I4MUcCu
Day Trade Alerts
19 Dec 14 12:05:16
#GazerAlerts Alert updates: $NQ +13% | via http://t.co/LQqutRgraR
PsychSignal
19 Dec 14 12:03:04
69.0% increased bullish conversations in $NQ in the past 1 hour.
Stanislav Drastich
19 Dec 14 12:02:18
Just standard #corrections, nothing too important. $NQ declines after Q3 bad news(?!)Third friday in the month... #options deforming #stocks
DailyStockPicks
19 Dec 14 12:02:04
$ECIG breakout up 50%, target $0.50 $WMT ex-CEO on BOD $SPEX $ABBV $HLF $NQ $VHC traders read: http://t.co/RB85WZsWYu http://t.co/xi3978GuDs
Stock Horizon LLC
19 Dec 14 12:00:05
Alert updates: $NQ +13% http://t.co/xTpy1d31ui
Quantheta
19 Dec 14 11:59:53
#TOPTICKERTWEETS $SPY $BBRY $AAPL $QQQ $IWM $DIA $UPIP $FB $SPX $NQ #quantheta #sentiquant 20141219 15:00:27:157
Jeff C Brook
19 Dec 14 11:58:54
$NQ has actually had an open down gap sitting since 12/01
Vijay Marolia
19 Dec 14 11:56:06
How can anyone still own this stock??? RPC's Quick and Easy on NQ Mobile http://t.co/csmPuJ1xbz via @hvst Short: $NQ
Momz Day Trading
19 Dec 14 11:52:18
When $NQ bounces it bounces, keep on watch list
Alpha Maven
19 Dec 14 11:48:53
RT @am_alerts: $NQ, Active, +11.81, 1H, 10:00 AM EST, 19 Dec, #NYSE
SIR
19 Dec 14 11:46:58
$NQ This is how I feel http://t.co/fWnnD0uNUF playing with my money is like playing with my emotions
Eric Turner
19 Dec 14 11:44:56
RT @ACInvestorBlog: $NQ failed the break of the $4 mark and is now bouncing...
T3MITAYO
19 Dec 14 11:44:35
@TMcWhirt33 Haha. Dude, Im holding patiently.Last time I sold $NQ,it went up 75% the next hour.So I am not falling for the short games again
Antonio Costa
19 Dec 14 11:42:38
$NQ failed the break of the $4 mark and is now bouncing...
applengineer
19 Dec 14 11:42:15
$NQ With the uptick rule in place since the open, selling in NQ shares is faster and more furious. So if you rule out shorts, what's left?
Alysia Sarkisian
19 Dec 14 11:39:12
RT @QuoththeRavenSA: $NQ chomping away at that $4 bid. CHOMP CHOMP CHOMP.
Keubiko
19 Dec 14 11:35:16
I feel bad for the conference call operator who was likely fired today for not cutting off @muddywatersre fast enough on the $NQ CC.
Quoth the Raven
19 Dec 14 11:33:12
$NQ chomping away at that $4 bid. CHOMP CHOMP CHOMP.
Mark Shine
19 Dec 14 11:32:35
$NQ how our exchanges allow this crap trade as long as they do , is beyond me
Alysia Sarkisian
19 Dec 14 11:31:51
RT @QuoththeRavenSA: The questions raised by @muddywatersre on $NQ's call last night should be considered. I wonder what other questions Ca…
Keubiko
19 Dec 14 11:31:42
@QuoththeRavenSA IMHO any fidcuciary that has owned $NQ in 2014 may have a liability issue.
Kristen Compton
19 Dec 14 11:30:39
RT @QuoththeRavenSA: The $NQ call summed up. @muddywatersre @Keubiko http://t.co/LRSiZzIPVA
Quoth the Raven
19 Dec 14 11:30:29
Almost half a million $NQ on the bid at $4 - buyside managers, this is your emergency exit if you're looking for one!
Mook Trader
19 Dec 14 11:29:37
just noticed $NQ at new intrady low $4
Quoth the Raven
19 Dec 14 11:29:06
$NQ looking like it wants to break $4 and close into $3's.
Keubiko
19 Dec 14 11:27:54
RT @QuoththeRavenSA: The questions raised by @muddywatersre on $NQ's call last night should be considered. I wonder what other questions Ca…
Quoth the Raven
19 Dec 14 11:26:02
The questions raised by @muddywatersre on $NQ's call last night should be considered. I wonder what other questions Carson was going to ask?
				
				
  +Follow July 3, 2014 10:53AM
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