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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.

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Results for NQ
29 Jan 15 03:56:05
$NQ $BIDU: Asian stocks lower as US crude hits six-year low: Jumei International ...: http://t.co/ovqC0wJ9KK
29 Jan 15 02:04:04
$NQ Weekly Bull Bear Zone 51.75/75.25 http://t.co/LUbumD0Qmn
29 Jan 15 02:03:40
$NQ Levels. Bull Bear Zone = 75/91.50 http://t.co/alkgr0KVCH
Interactive Brokers
29 Jan 15 01:00:49
#IBTI Technical Analysis - Nasdaq100 (NQ) Approaching Upchannel Support on Weekly Chart http://t.co/svYGifB1UU $NQ $NDX
28 Jan 15 20:42:46
http://t.co/7cnaGTmDi4 <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $NQ $CSIQ $LVS $LNCO
28 Jan 15 18:34:31
$NQ 60min footing found against 4117.25;relief > 4142.75; solid footing > 4154.50 for air 4169.00
Jim Harrison
28 Jan 15 16:53:11
Of Interest: $ES $NQ $YM $TF $ZB Cramer: Respecting high-frequency trader damage - CNBC http://t.co/PvgjyAMevf
Trader Thomas
28 Jan 15 15:15:04
Except for one $AAPL long and one $TSLA short, I just traded $ES and $NQ. I trying to simplify everything, even my charts. Less is more.
Trader Thomas
28 Jan 15 15:12:49
I've really enjoyed trading $ES and $NQ futures. Simple, no nonsense, no market maker games. I loving these more and more.
Trader Thomas
28 Jan 15 15:09:17
@parabol128 @cuzmane This was me yesterday, totally sucked, was all over the place. Much better today, laser like focus on $ES and $NQ.
28 Jan 15 14:48:48
$NQ Why Not To Expect Omar Khan To Leave Before Year-End http://t.co/zoyhohw0IT
Wayne Lord
28 Jan 15 12:55:43
Close around 4140 on $NQ will put S1 around 4105.
Trader Thomas
28 Jan 15 12:42:32
Sick short on $ES and $NQ!!
Mark Trader
28 Jan 15 12:20:03
The last http://t.co/8hGh2pPo4U alert popped over 400%. So sweet and free to sign up. $HOV $URZ $PZOO $ENDRQ $SCRC $NQ
28 Jan 15 12:14:45
Take a look at the U.S 10 yr. - making a big statement for the bears right now. #ES #SPX $NQ $DJIA
Trader Thomas
28 Jan 15 11:50:41
Futures a super liquid and they have killer tax advantages. $NQ and $ES are taxed 60/40. 60% of gains at 15% tax, 40% at 35% max.
Trader Thomas
28 Jan 15 11:45:48
$ES and $NQ for starters. 1 tick on $ES is $12.50 = $50 per point. 1 tick on $NQ is $5 = $25 per point.
28 Jan 15 11:44:27
If the #FED can't add rocket fuel anymore what's left to inspire the bulls? $ES $NQ $DJIA #stocks $SPX
Trader Thomas
28 Jan 15 11:37:48
Market looks super weak, no leadership anywhere, everyone seems on edge. So, I'm not swinging nothin'! Just daytrading $ES and $NQ.
28 Jan 15 10:55:59
RT @MookTrader: long 2000 more $NQ 3.58 avg
28 Jan 15 09:11:51
@NQMGMTisarrogan @MobileOmar @matthewmathison Perhaps the Co-CEO is waiting for the next 20-F to find out what acquisitions $NQ made.
28 Jan 15 09:11:03
I calculate $NQ printed an average of ~274,000 shares (~55,000 ADRs) per day last year, including weekends and holidays. #QE
28 Jan 15 09:02:41
@NQMGMTisarrogan @MobileOmar @matthewmathison I think you mean 3.61. My take is I have no idea what is keeping the price up here. $NQ
Large Void Bot
28 Jan 15 09:00:21
Popular: $YHOO, $AAPL, $BA, $FB, $RDWR, $F, $LGF, $SPLS, $GD, $USO, $ARIA, $NQ, $ANIP, $BRK.B, $GSK, $FAS, $WTI, $BRK.A
28 Jan 15 08:46:15
$NQ Fire sale on NQ bond Issue:NQ4175992, Nov 19: yield 8.6%, Jan 27: yield 14.35% What does the smartest money on the street know over u?
Alan Farley
28 Jan 15 08:29:24
Nasdaq-100 "just" 55 points off overnight high. $NQ $QQQ
28 Jan 15 08:21:31
RT @Atomic1068Ro: $NQ
Futures Institute
28 Jan 15 08:06:59
US #Equity futures trade in the green after Wall ST. Cash open, with strong earnings from Apple and Yahoo lifting $NQ up by 1% #NASDAQ100
28 Jan 15 08:01:30
long 2000 more $NQ 3.58 avg
ro bi
28 Jan 15 07:59:49
28 Jan 15 07:11:21
http://t.co/Ucb8ElwZfO @super_trades student on track to $1 million profit 1st year trading! $PAOC $MOBO $THCZ $FB $NQ $ZPIN
28 Jan 15 07:00:28
#SENTISHIFTUP $SPX $UTX $CEO $HLF $CAD $JPM $LUV $TLT $GDX $NQ #sentiquant 20150128 10:00:15:072
28 Jan 15 06:09:08
Lower lows on $YM and $NQ
Penny Stock Secret
28 Jan 15 05:33:07
This Guy Turned $100 into over $10,000 In Just 30 Days! http://t.co/vezCDY95do .. $NPTN $NPV $NQ
28 Jan 15 05:10:24
Watching $YM and $NQ for potential downside follow through
Alan Farley
28 Jan 15 04:56:04
Nasdaq-100 overnight rally "helps" but it's no game changer, $QQQ $NQ http://t.co/QSfHkt7OvN
28 Jan 15 04:35:00
$NQ 60min inside range 4232.50//4201; Outter1 4242.25//4191.75; Outter2 4253.75-4254.50 next strong//4181.00 for retest
28 Jan 15 04:32:41
$NQ 60m off its best session in the overnights found R against 1/25 lows at chart level 4232.50 leaves 60min reversal retest pattern > 4201
28 Jan 15 02:07:30
$NQ Weekly Bull Bear Zone 51.75/75.25 http://t.co/IPWUkOnYXd
28 Jan 15 02:07:04
$NQ Levels. Bull Bear Zone = 80.50/92.50 http://t.co/oh3PC3hqjn
Jim Harrison
27 Jan 15 23:00:07
Of Interest: $ES $NQ $YM $TF $ZB Russia tried to learn how to use high-speed trading to rock market, US says - M... http://t.co/sLmSKqQB74
Jim Harrison
27 Jan 15 20:19:39
Of Interest: $ES $NQ $YM $TF $ZB Forecasting Q4 GDP: A Look at the WSJ Economists' Collective Crystal Ball http://t.co/vPZPaskmf2
Bryce Goodman
27 Jan 15 20:15:43
$NQ out, don't want to lose while working on other stuff http://t.co/3rnazBwwjC
Wall Street Frank
27 Jan 15 20:14:58
$NQ gap fill on deck?
Bryce Goodman
27 Jan 15 20:08:13
$NQ breakout at 4212 on 5 min. Waiting for exit http://t.co/RrQGbYJt5b
i'm trading drunk ن
27 Jan 15 19:49:22
Rippage!!! Burn bears!! $ES $NQ
Ryan Morse, CMT CFP®
27 Jan 15 19:48:53
$YM +50, $NQ+44, $ES +12
Carlo Kuhrt
27 Jan 15 19:46:54
#Nasdaq Futures /NQ $NQ +44.5 @ $4222. E-mini /ES $ES +11.5 @ $2041.5. #crudeoil /CL $CL -.75 @ $45.48
Wall Street Frank
27 Jan 15 17:13:14
Long $NQ. Hoping $AAPL earnings gives it a pop tomorrow.
27 Jan 15 16:49:59
@MobileOmar @NQMobileIR $NQ. I'm not motivated to read your blog - support the share price - I do not trust the way you run a company.
  +Follow July 3, 2014 10:53AM



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