Boston, MA 06/06/2014 (wallstreetpr) – NQ Mobile Inc (ADR) (NYSE:NQ) said on June 4, 2014 that the independent committee found no fraud practices in the company, as alleged by Muddy Waters Research Group, which is a short-seller. With this announcement, the shares of the company jumped rapidly. The Chinese mobile security software maker said that the committee has not found any evidence for fraud and that there was no proof that its cash balances and revenue was inconsistent with the public disclosures. Muddy Waters Research Group had alleged NQ of massive fraud in October 2013.
Background of the Case
In October 2013, Muddy Waters alleged that around 72% of the professed 2012 revenue of NQ from the sale of security products in China was completely fictitious. Muddy Waters said that this fictitious revenue came from Yidatong, a shell company, which was controlled by NQ itself. Just a day after the allegations from the Muddy Waters, NQ Mobile Inc (ADR) (NYSE:NQ) released its bank account details in Hong Kong as well as China. NQ also, in the meanwhile, threatened to sue Muddy Waters legally.
NQ however, said that the committee appointed to find out about the fraud established that the revenue as well as cash flows from the customers to the carriers was completely verifiable and not fictitious. Muddy Waters still remains intact on its allegations.
The Independent Investigating Committee
The Independent Investigating Committee comprised of four autonomous directors of NQ, apart from independent counsel Shearman & Sterling LLP as well as Deloitte & Touche Financial Advisory Services Ltd, a forensic accounting firm.
Explanation from Muddy Waters
The Founder of Muddy Waters, Carson Block said that the press release issued by NQ Mobile Inc (ADR) (NYSE:NQ) was yet another method of white-washing its fraud that it did to the U.S. investors.
Who are the Short-Sellers?
Short-sellers are the ones who mint money on the dropping stock price of a company. They sell off the borrowed shares with a hope that they would buy them back when the share prices fall down. Then they return them to lenders, thereby deriving profit from this difference.
