Muddy Waters Sees NQ Delist as Khan Calls Forecast Absurd

Carson Block, the Muddy Waters LLC founder whose short call prompted a 62 percent plunge in NQ Mobile Inc. (NQ), said the stock will be delisted within a year. NQ’s co-chief executive officer said the prediction is “absurd.”

“We have no doubt that in a year from now, this company will have been delisted,” Block said in a Bloomberg Television interview today with Stephanie Ruhle on the “Market Makers” program. “Over 90 percent of the revenue doesn’t exist.”

The shares of NQ Mobile dropped 11 percent to $12.78 after rising as much as 10 percent earlier today. The stock is down more than 40 percent since Block issued an 81-page report on Oct. 24 calling NQ Mobile a “massive fraud” and claiming that its largest customer is itself.

NQ Mobile, based in Beijing, said today that its independent special committee retained the law firm Shearman & Sterling LLP to review Muddy Waters’s allegations. On Oct. 24, the research firm said that “NQ is a massive fraud” and that its “cash balances are highly likely to not be real.” The company responded by releasing data of its bank deposits to investors and held a two-hour conference call on Oct. 25 rebutting Block’s claims.

In an interview with Bloomberg Television today, Omar Khan, co-chief executive officer of NQ Mobile, said a delisting from the New York Stock Exchange is “absolutely absurd.” Rich Adamonis, a spokesman for the NYSE, said the bourse has no comment.

Listing Requirements

The NYSE company listing requirements include having a market value of at least $40 million, according to the bourse’s website. NQ’s market capitalization dropped to $664.7 million from $1.2 billion on Oct. 23.

“This is them playing a shell game and very poorly trying to recover from the lies that they have previously told,” Block said in the interview. “We really have seen this movie before.”

Muddy Waters has short positions in NQ, Block said on Oct. 25. He gained fame for his short-selling calls after regulators halted trading in four of the first five companies he targeted starting in June 2010. A short sale is one in which stock is borrowed and sold, with the hope of profit by repurchasing the shares later at a lower price to be returned to the lender.

NQ Mobile said this week it would transfer $100 million of deposits to Standard Chartered Plc and authorized it to independently verify the deposits as well as make details available to investors. The Beijing-based company also posted a 90-page document to refute accusations mentioned in Muddy Waters’ note, disclosing details including top 100 mobile devices that have activated its security software. NQ said it’s suing Muddy Waters in court in China.

NQ Mobile raised its 2013 revenue estimate to as much as $188 million on Aug. 12 from the upper limit of its prior forecast of $184 million.

To contact the reporter on this story: Matthew Kanterman in New York at mkanterman2@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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