NQ Mobile to put accounts on display to refute Muddy Waters claims

BEIJING Fri Oct 25, 2013 6:05am EDT

BEIJING Oct 25 (Reuters) - NQ Mobile Inc, the Chinese mobile internet company labelled a "massive fraud" by Muddy Waters Research Group, said on Friday it will "open the kimono" in putting its accounts on display to rebut what it described as false allegations.

Executives of New York-listed NQ said in an interview with Reuters the company will hold an investor conference call before U.S. markets open on Friday morning to respond to a report by the U.S.-based short seller that said the "vast majority" of NQ's reported China revenue was fraudulent.

"These are fully false allegations," said Henry Lin, co-founder and co-chief executive of NQ.

Muddy Waters reports have previously unleashed scandals involving other Chinese U.S.-listed companies, including Sino-Forest Corp, Longtop Financial Technologies Ltd. and China MediaExpress Holdings Inc. Its report on Thursday wiped more than $500 million off NQ's market value, nearly half of its capitalisation.

"We know no better method than to just completely open up the kimono and say, 'Here's our cash balances by account,'" Omar Khan, NQ's co-chief executive, said in the interview in Beijing.

Khan said NQ management is dealing with the report as a matter of urgency. "We will use all means necessary and reasonable to protect our shareholders, our employees, our company, and our investors."

On Thursday Muddy Waters initiated coverage of NQ Mobile, saying that at least 72 percent of NQ's purported 2012 China revenue from its security products is fictitious, coming from Yidatong (YDT), a company that Muddy Waters alleged NQ controls.

"NQ's largest customer is really NQ," the report read. "Our due diligence process included visiting 10 sites purportedly occupied by YDT, all of which were empty or did not exist."

Over the last three years, NQ has raised $330.6 million from stock and bond fund-raising. Earlier this month, it completed the sale of US$172.5 million in convertible bonds. Morgan Stanley and Deutsche Bank unit Deutsche Bank Securities Inc purchased $22.5 million of that offer.

The company was founded in 2005 and listed on the New York Stock Exchange in 2011 in an $89 million fundraising that was underwritten by Piper Jaffray Companies, and raised an additional $69 million in a secondary offering last year.

Morgan Stanley and Deutsche Bank declined to comment. Piper Jaffray did not respond to an email request for comment.

(Details of the conference call are as follows:

NQ Mobile Inc. Conference Call to Address False Allegations (Live)

October 25, 2013, 8:30 AM Eastern Time

For the teleconference please call:

U.S. Toll Free: 1 866 519 4004

Hong Kong: 800930346

United Kingdom: 08082346646

Conference ID: 92639158)

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Comments (1)
rneree wrote:
The Dogs don’t show for the Fight

After 14 years in the investment profession, it still shocks me how easy the shorts have it. It’s an irresistible financial gain that brings out the greedy sob’s that love targeting and tanking a stock for personal gain.

The statements made by Muddy Waters, are, well, Muddy at best. Filled with claims that sound pretty desperate, and clearly have a personal agenda to tank a stock…many of their words henge on guessing and speculation that is completely unproven…how many times do they say “likely”…I mean, shouldn’t a research firm who claims accuracy be, well…accurate? sure. But that’s not really what companies like that are in it for…the mud-slingers.

I was satisfied, nearly, with the conference call that took up nearly 3 hours of my mid-morning trading session and would personally like to see companies like Muddy Waters, get slammed like advisers do for making false and inaccurate statements that effect investors decisions. Is it any shocking surprise that a representative from Muddy Waters didn’t bother to join in on the conference call and make their claims and questions directly to the company? They were all on the line, CEO’s, CFO’s, Directors…ready to answer accusations, guess who didn’t show for the fight…Muddy Waters. Kind of like throwing a punch and running. Reminds me of the trash talkers who don’t show up for the fight…were they home wetting their pants? What cowards.

Maybe their day will come, when the SEC and NYSE get tired of the stock market short sellers getting cheap thrills and fine their asses what investors lose…to the tune of 500Million.

Someone appears to be starved for attention here, oh and large financial bonus’s, let’s not forget the real incentive.

I am pleased that NQ has taken this all extremely seriously, is not only pursuing a self inflicted audit of records upon themselves (NOT the SEC, who seems to not be batting an eye at these sleepy claims).

I’m looking forward to the release of assets, bank statements, and audit reports (which the company has verified this morning, with full disclosure, to amount to roughly 300 million in cash or equivalent). If it’s a scam, they’re doing a heck of a job…hiring a full staff of PH D’s to run the place, only to put themselves into a prison? Sounds like a good use of 8 years of college…Wake up people. This IS a legitimate company we’re deal with.

Muddy Waters went as extreme as to say their cash balances are not real. It’s amazing how much this company can see in their own little imagination. Why not join the conference call? What better opportunity to face the big bad wolf? Now that would have been a fight worth showing up for.

They failed to mention the companies new platform release, that could up revenues by another 100 Million next year. This company has year over year continued to grow, expand, and acquire…it has price targets from MANY analyst reports that range modestly between 28-45/share. I suppose all the analyst, banks, investors, etc…are all the ones who haven’t done due diligence. I suppose all the patents and PH D’s are all fake too? Amazing how blind the SEC is? Ehh. Do we really NEED companies like Muddy Waters falsely tanking stable company stocks? Doesn’t the government do a well enough job on it’s own.

I’ve learned to just roll with the punches of the short sellers, picking up good stock at cheap prices right along with them. It’s an opportunity, but an ill begot one.

As Warren Buffet says “Be fearful when everyone else is greedy. And be greedy when everyone else is fearful.”

This stock is having the pull back of the year…and I’m excited to see what this one does when Quarterly earnings release Nov. 12th, the audit committee completes their report, and Muddy Waters eats dirt.

Oct 25, 2013 11:04pm EDT  --  Report as abuse
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