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)