NQ Drops on Piper Jaffray Rating Halt: China OvernightBelinda Cao
NQ Mobile Inc., the Chinese mobile-services provider that sank 62 percent in the three days after Muddy Waters LLC said it inflated sales, plunged in New York as Piper Jaffray Cos. suspended its rating on the stock.
American depositary receipts of NQ Mobile tumbled 20 percent, the biggest slide since Oct. 24. The Bloomberg China-US Index of the most traded Chinese stocks in the U.S. fell 1.3 percent to 102.52 yesterday. E-Commerce China Dangdang Inc., the nation’s biggest online bookseller, slipped to a two-month low, while Mindray Medical International Ltd. dropped to the lowest level since February after the company cut its sales forecast.
NQ Mobile has plunged 58 percent since Oct. 24 when Muddy Waters, the research firm founded by short seller Carson Block, said in a report that the company inflated revenue and misrepresented cash balances. NQ Mobile has denied the allegations. Piper Jaffray, the investment bank and asset manager founded in 1895, suspended the equivalent of a buy rating on the stock. It was the lead manager of NQ Mobile’s initial public offering in May 2011.
“Obviously it would cause tremendous concern, especially if it’s the IPO lead manager,” Erik Lam, director of Asian equity sales at Auerbach Grayson & Co. in New York, said by phone. “That certainly doesn’t sound positive.”
None of the three analysts in the Piper Jaffray note could be reached by phone when contacted by Bloomberg News. Piper Jaffray investor relations manager Tom Smith didn’t reply to a phone call and an e-mail seeking comment.
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., dropped 1.6 percent to $37.28 in New York, snapping a six-day rally. The Standard & Poor’s 500 Index slipped 0.3 percent as investors awaited this week’s data on economic growth and employment.
NQ Mobile’s ADRs plunged to $9.52 after tumbling the most since a 47 percent plunge on the day of the Muddy Waters report. Ten-day volatility on the shares surged to a record 416 yesterday, from 83 on Oct. 23.
“We are suspending our rating, price target and estimates for NQ Mobile until we have more deeply investigated various allegations against the company made by third parties,” Mark Murphy, a San Francisco-based analyst at Piper Jaffray, wrote in an e-mailed report today. The company’s last rating on NQ Mobile was the equivalent of a buy.
NQ Mobile signed an agreement with China Unicom Hong Kong Ltd. to offer its NQ Family Guardian software in the mobile-phone carrier’s WoStore, according to a statement by the Beijing-based provider yesterday.
Block issued an 81-page report on Oct. 24 calling NQ Mobile a “massive fraud” and claiming that its largest customer is itself. He said last week the stock will be delisted within a year.
ADRs of Dangdang, as the book retailer is known, slumped 3.9 percent to $8.33, the lowest close since Sept. 6.
Beijing-based Dangdang is scheduled to report third-quarter earnings on Nov. 14, it said in a statement dated Nov. 4. The company cut its third-quarter sales estimate by as much as 4 percent on Oct. 21.
Mindray, a medical device manufacturer based in Shenzhen, fell 1.9 percent to $36.42, the lowest close in eight months. Trading volume was three times the 90-day average compiled by Bloomberg.
Mindray’s third-quarter adjusted net income of 47 cents a share missed the 48-cent average projection of five analysts surveyed by Bloomberg. The company forecast its 2013 revenue growth will grow at least 13 percent from a year earlier, according to its statement on Nov. 4. That compared with its previous estimate of 18 percent.
Vipshop Holdings Ltd., an online clothing retailer based in Guangzhou, sank 3.4 percent to $76.32, sliding the most since Oct. 28. BNP Paribas SA cut its recommendation on Vipshop to hold from a buy yesterday.
The Hang Seng China Enterprises Index in Hong Kong, retreated 0.5 percent from a six-week high to 10,637.15, while the Shanghai Composite Index climbed 0.4 percent to 2,157.24.