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NQ Mobile – The Fog Factor

December 11, 2013 | About:
Sally Jones

Sally Jones

49 followers
NQ Mobile is a China-based provider of mobile Internet services that markets itself with concern for user protection. But what about shareholder protection? According to Forbes, NQ is in trouble. When research firm Muddy Waters blew the whistle on its largest client back in October, calling the company a “fraud,” NQ Mobile’s market cap fell almost instantly by $500 million. The stock price also plummeted from $24.62 on Oct. 21, 2013, to $8.80 on Oct. 28. NQ Mobile denies allegations, according to Forbes and Bloomberg.

Three times in the last week Businesswire reported on NQ Mobile’s legal issues regarding a class action lawsuit filed on behalf of purchasers of NQ Mobile Inc. securities between May 5, 2011 and October 24, 2013. According to Businesswire press releases for Glancy Binkow & Goldberg, Brower Piven and the Law Offices of Howard G. Smith, NQ Mobile is accused of overstating and exaggerating its financial performance based on the October 24, 2013 Muddy Waters Research Group report that also alleged the following:

“At least 72% of NQ’s purported China security revenue is fictitious and the Company’s largest customer is actually NQ Mobile.

“NQ Mobile’s actual market share in China is about 1.5%, rather than the approximately 55% it purports, and its paying China user base is less than 250,000, rather than the approximately six million it purports.

“NQ Mobile’s Antivirus 7.0 is unsafe for sale to consumers, and creates serious vulnerabilities, making users’ phones prone to data compromise and cyber attack.”

Read Muddy Water’s report on NQ.

NQ Mobile Inc. (NQ)

Up 110% over 12 months, NQ Mobile Inc. has a market cap of $634.2 million; shares trade with a P/E of 95.00.

The current share price is $11.89. The company does not pay a dividend.

NQ Mobile Inc.’s portfolio includes mobile security, privacy protection, mobile games and advertising.

Track historical pricing, revenue and net income:

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Prior to the Muddy Waters’ report, three gurus held stakes in NQ as of the third quarter of 2013. No insider trading was found.

Guru Action: As of Sept 30, 2013, the top guru stakeholder Steven Cohen increased his position by 56384.1%, buying 563,841 shares at an average price of $16.25 per share, for a loss of 26.8%. He gained 63.5% and 41.2% in the first and second quarters of 2013, respectively.

In the same quarter, RS Investment Management made a new buy of 11,289 shares at an average price of $16.25 per share, for a loss of 26.8%.

As of Sept 30, 2013, Ron Baron reduced his position by 10.27%, selling 16,029 shares at an average price of $16.25 per share, for a loss of 26.8%. In four prior quarters, he made double-digit gains that peaked at 79.6% in the fourth quarter of 2012.

Read more about Muddy Waters’ and NQ Mobile.

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 4.5/5 (4 votes)

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