Longbow Securities revealed that it acquired an 8% stake in NQ Mobile Inc (ADR) (NYSE:NQ), the firm that Muddy Waters accused of massive fraud just six days ago, and then filed another report with the SEC that it had already sold off its position, basically making a quick buck on a recovering stock, reports Agustino Fontevecchia for Forbes.
NQ Mobile shares collapse
NQ Mobile Inc (ADR) (NYSE:NQ)’s share price collapsed after Muddy Waters released a damaging report, but the company quickly released a lengthy refutation and announced that it would bring in independent investigators to prove that it had done nothing wrong. NQ Mobile has also been transferring cash to Standard Chartered PLC (LON:STAN) to put investors at ease and has worked with major accounting firms all along. Analysts have been impressed with the thorough response to these allegations, and some believe that NQ Mobile isn’t behaving like a company that got just got busted.
Stocks haven’t fully recovered, but most analysts haven’t moved long-term price targets an inch. The stock is up 14% just today, and some people are already saying the stock will be back above $20 by the end of next week. Hedge funds like Longbow are using this opportunity to cash in on the market’s knee-jerk reaction to Carson Block’s accusations.
Muddy water’s price target for NQ Mobile
For companies that sold their shares in NQ Mobile Inc (ADR) (NYSE:NQ) into the falling market (Muddy Waters gave NQ a sub-$1 price target, which put some people in panic mode), this could be a slight blow to Block’s reputation. He already had a miss earlier this year when he accused American Towers Corp (NYSE:AMT) of misreporting a deal in Brazil, but analysts sided with AMT. However, Block has also had some big winners including a fraud owned by John Paulson, Sino Forest.
Realistically, no one had enough time to carefully study the Muddy Waters’ allegations before the sell-off began, although this is not unique to Muddy Waters. Things could still turn around for Block – NQ Mobile Inc (ADR) (NYSE:NQ)’s rebound is based on appearances just as much as its plummet a few days ago, and we won’t have any solid, independent information in the immediate future. But the story for the last few days has been about Block regaining his lost influence and that has slightly changed in the past few days.