NQ Mobile Inc. was sued by an investor who seeks to represent a group of shareholders who allegedly lost money after a research firm said the Chinese company’s revenue was largely exaggerated.
Phuong Ho, a stockholder, filed the complaint today in federal court in Manhattan on behalf of all investors who bought NQ Mobile securities from a May 5, 2011, initial public offering to Oct. 24.
The stock price of Beijing-based NQ Mobile, a mobile Internet services provider that traded on the New York Stock Exchange, “fell a shattering 47 percent” to $12.09 a share when the research report was issued Oct. 24.
The report by Muddy Waters LLC “asserted that NQ Mobile has greatly overstated and exaggerated its true financial performance,” according to the complaint.
The research firm alleged that at least 72 percent of the company’s revenue in China is fictitious and that its actual market share in China is 1.5 percent instead of 55 percent that it had claimed, according to the complaint. The report also questioned financial statements filed with the Chinese government and the U.S. Securities and Exchange Commission.
Kim Titus, a spokesman for NQ, declined to comment on the lawsuit and referred to an Oct. 24 statement by the company in which it said the allegations in the report were false.
“NQ Mobile will respond quickly, transparently and forcefully to these false allegations regarding our company,” it said in the statement.
Ho seeks damages under federal securities laws on behalf of investors who bought common stock and call options or sold put options of NQ Mobile from the time of the IPO. Investors lost about $500 million when the company’s stock price dropped after the report was issued, according to the complaint.
NQ Mobile was founded in 2005 and offers products such as NQ Mobile Vault, NQ Mobile Call Blocker and NQ Space, according to the complaint.
The case is Phuong Ho v. NQ Mobile Inc., 13-cv-07608, U.S. District Court, Southern District of New York (Manhattan).