NQ Mobile Inc (ADR) (NYSE:NQ) became a popular short position after notorious short-selling firm Muddy Waters published its short thesis on the company. Now another firm is siding with Muddy Waters founder Carson Block, noting his track record in identifying Chinese frauds. Meanwhile Block continues to maintain his view that NQ Mobile’s accounting practices are fraudulent.

NQ Mobile

Why bulls like NQ Mobile

In a post on Harvest, the folks at Regal Point Capital Management explained why they’re short on NQ Mobile Inc (ADR) (NASDAQ:NQ). You may remember they made some very colorful comments about another popular short position—Herbalife Ltd. (NYSE:HLF)—recently. This time, they note five bullish points about NQ Mobile, like the fact that it continues to churn out record results. In fact, they believe NQ Mobile’s stock price could actually triple if it turns out that the company is legit, although they appear to assign a very low likelihood that this will happen.

Also NQ Mobile Inc (ADR) (NASDAQ:NQ) has signed a number of new partnerships with major companies like Sprint Corporation (NYSE:S) and has retained reputable global accounting firm PricewaterhouseCoopers as its auditor. Hedge funds have been snapping up the company’s stock in large quantities, and NQ Mobile continues to maintain that the allegations raised by Muddy Waters are false.

Why bears don’t like NQ Mobile

On the bearish side though, Regal Point notes that Muddy Waters has high level of expertise on the Chinese market. The firm also states, “NQ has a history of being shady” and warns of a possible investigation by the U.S. Securities and Exchange Commission. It also states that there are too many unanswered questions piling up and that the company’s recent results were disappointing.

In its post, Regal Point said it is short on NQ Mobile Inc (ADR) (NASDAQ:NQ) because it thinks the company’s story is more like a fairy tale that probably won’t have a happy ending. In addition, the firm points out that the Chinese company has changed its stories about “YTD,” share buybacks and auditing and also delayed its financial reports.

Regal Point’s bottom line on NQ Mobile Inc (ADR) (NASDAQ:NQ) is this: “When you consider the multiple delays and the potential SEC investigation, NQ Mobile raises more red flags than the Soviet Union.”

Regal Point sides with NQ bears

Hedge fund manager Vijay Marolia of Regal Point shared some very interesting comments about NQ Mobile Inc (ADR) (NASDAQ:NQ)  with ValueWalk in an email. He noted that the company’s founder told shareholders on their recent earnings call that NQ stands for “never quit!” However, he called this “nonsense” and says maybe NQ should stand for “not quite.”

“Not quite mobile… Not quite able to explain who their customers are,” Marolia said. “And lately, not quite able to pass PwC’s sniff test as the audit results & 20F are long overdue. Meanwhile, IR has been less than helpful in just about every way.”

What NQ Mobile seems to “never quit”

He did find something he thinks NQ Mobile Inc (ADR) (NYSE:NQ) really does “never quit”: “making up excuses.”

“The pattern here is all too familiar, and Carson Block has one of the best track records in researching fraudulent companies in China,” Marolia said. “There’s a reason NQ won’t sue Carson in the US… And there’s a reason for all the delays… Unfortunately for NQ shareholders, it’s ‘not quite’ a good reason. I believe NQ is currently being investigated; hence the delays.  I honestly don’t see how anyone in their right mind could feel comfortable owning shares of NQ.”

Shares of NQ Mobile Inc (ADR) (NYSE:NQ) slumped as much as 3% during morning trading today.