Short-Seller Block Bluffs His Way Onto NQ Mobile’s CallYe Xie and Elena Popina
Fourteen months after short seller Carson Block first alleged that Chinese mobile-security provider NQ Mobile Inc. is a fraud, the feud is only getting more acrimonious.
On Thursday, Block, the founder of research firm Muddy Waters LLC, initially hid his identity on an NQ Mobile conference call, presenting himself as Jim Oberweis Jr., an investor who was once the company’s second-largest shareholder. Block was then chosen to ask the first question of company executives before his line cut off, according to a transcript of the call.
“Your first question comes from the line of Jim Oberweis Jr.,” the operator said, following more than 30 minutes of presentations from company officials, according to the transcript. “Please go ahead.”
“Yeah. Hi. Actually, this is Carson Block,” the short seller said.
Block went on to ask why NQ Mobile, which is down more than 80 percent in New York trading since he made his fraud allegations, hadn’t discussed the status of former co-chief executive officer Henry Lin, whose whereabouts has been the subject of Chinese media speculation since his Dec. 10 resignation.
Given that there was no resignation letter in the company’s filings, “this is pretty concerning,” Block said before his phone line dropped.
“Unfortunately, NQ cut off the question,” Block said in an e-mailed response about the exchange to Bloomberg News. His spokesman Zach Kouwe said Block misrepresented himself initially because in the past NQ Mobile executives have refused to call on him during the question-and-answer period.
Shares of the Beijing-based company sank 19 percent to a three-year low of $4.09 on Friday in New York. NQ Mobile, which concluded an internal probe that didn’t find any evidence of wrongdoing in June, provided unaudited financial results for the first three quarters of 2014 Thursday after months of delays. It also announced it was selling its FL Mobile game unit for as much as $630 million.
Kim Titus, a spokesman for NQ Mobile, didn’t reply to an e-mail and phone calls seeking comment on whether the company had cut off Block on purpose and whether it has prevented him from asking questions in the past.
NQ Mobile co-Chief Executive Officer Omar Khan did go on to address Block’s question last night after the short seller was dropped from the call.
“I want to actually answer Carson’s question,” Khan said before adding that Lin’s departure was due to personal reasons unrelated to the company.
Jim Oberweis, president of Oberweis Asset Management Inc., declined to comment in an e-mail. His firm sold its entire 1.3 million-share stake in the third quarter, according to a filing with regulators in November.
“It’s a rather odd situation and surprising” that Block appeared on the call, said Drew Bernstein, principal of Marcum Bernstein & Pinchuk LLP, which is NQ Mobile’s auditor. “Irrespective of who asked the question, I thought it was a legitimate question and I give Omar credit for addressing it,” said Bernstein, who participated in the call.
Lin’s departure, announced on Dec. 10, follows the exit of NQ Mobile’s chief financial officer in August, the resignation of its audit panel chairwoman and the dismissal of its auditor in July. NQ Mobile filed its 2013 annual report in October after delaying it twice.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.