Oct. 28 (Bloomberg) -- NQ Mobile Inc., the Chinese mobile-services provider that sank 57 percent last week after Muddy Waters LLC said it inflated sales, extended declines on speculation ZTE Corp. ended a contract with the company.
Shares of NQ Mobile plunged 17 percent to $8.80 in New York. The stock had gained as much as 20 percent today before a report on the Seeking Alpha website. The three-day, 62 percent tumble reduced the company’s surge this year to 46 percent, from 279 percent as of Oct. 23.
ZTE, China’s third-largest smartphone vendor, doesn’t have a partnership to use NQ Mobile’s services, according to the post on Seeking Alpha which quoted a report on NetEase Inc.’s website on Oct. 25 that cited unidentified people at ZTE. Muddy Waters founder Carson Block wrote in an Oct. 24 report that investors should sell NQ Mobile, saying the company inflated revenue and misrepresented cash balances. NQ Mobile denied the allegations the next day.
“So far responses from NQ haven’t been convincing enough and there are still many questions raised by Muddy Waters that need to be answered,” Henry Guo, an analyst at ABR Investment Strategy LLC in San Francisco, said by phone. “Negative news like the report posted on Seeking Alpha today could hurt shares further unless management takes more efficient actions to help dispel people’s doubts about the company.”
Kim Titus, an NQ spokesman based in Dallas, said by e-mail that the partnership is still in place. Margret Ma, ZTE’s Shenzhen-based media relations manager, didn’t reply to phone calls and e-mailed messages seeking comment after hours.
ZTE said in June 2012 that its V961 handset had NQ Mobile’s security application built in.
NQ, based in Beijing, posted the biggest weekly decline since its 2011 initial public offering last week.
Block said in an interview with Bloomberg Television on Oct. 25 that the company will end up like Sino-Forest Corp., the Chinese plantation company listed in Canada that filed for bankruptcy protection last year after Muddy Waters claimed it exaggerated revenue.
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