Supposed “Massive Fraud” NQ Mobile Surges on Partnership with Sprint

Jacob Harper |

Chinese tech company NQ (née Netqin) Mobile (NQ) popped on Jan 15 after the company announced an impending deal with Sprint (S) to incorporate their software into Android phones. The announcement comes a scant three months after famed short-selling analysts Muddy Waters declared NQ a “massive fraud” and slapped the company with a price target of zero.

In their report, Muddy Waters asserted that “at least 72 percent of their purported security revenue is fictitious” and claimed the company overestimated domestic market share by about 35 fold. Muddy Waters was joined by FJE Research, who claimed NQ had greatly inflated their reported user base.



These claims caused investors to bet en masse on NQ’s failure, with short float on the company eventually reaching 42.14 percent. Shares of the company experienced a sharp correction, tempering a run that had seen the company’s stock price triple in four months between July and October 2013.

Despite the allegations, Sprint and Android progenitors Google Inc. (GOOG) obviously have faith in NQ. The deal will put NQ’s “skin”— software security and home screen add-ons — in Sprint’s software packages, and will introduce NQ’s products to a wide American audience.

NQ is perhaps one of the most divisive tech plays on the market. Not all analysts are as pessimistic on the stock as FJE and Muddy Waters. On Jan 15 Zack’s upgraded the stock to “neutral” and raised their price target to $14.40 a share. Some analysts are even more bullish, with Canaccord Genuity reaffirming a “buy” in October shortly after the release of the Muddy Waters allegations.

NQ has been on a wild ride the last six months. After topping $25 a share in early October the stock plummeted to under $9 in light of the fraud accusations. On the deal with Sprint the company rebounded significantly. By Jan 15’s midday trading, shares had gained 12.07 percent to hit $15.63 apiece.

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

Companies

Symbol Name Price Change % Volume
S Sprint Corporation 9.30 0.30 3.33 43,255,377
NQ NQ Mobile Inc. American Depositary Shares each rep 3.99 0.08 2.05 362,226
GOOG Alphabet Inc. 828.07 3.91 0.47 1,611,039
FETLY Far Eastone Telecommunications Co Ltd GDR Sponsore n/a n/a n/a 0

Comments

Emerging Growth

DynaCERT Inc.

DynaCERT Inc is engaged in the assembling, distributing and installation of a patent pending transportable hydrogen generator after-market product, for use in the heavy tractor-trailer industry and into large stationary…

Private Markets

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…

WayBetter

The spark hit Jamie when he saw co-workers competing to lose weight. Instead of pizzas and subs, they were eating salads and jogging along the river. Some were sneakily leaving…