UPDATE: 9:20AM EST: NQ Mobile has just responded to the latest report from Muddy Waters. The company states:

Today’s IR update marks the beginning of a new chapter for NQ Mobile.  We recognize that the past three months have marked a sequence of unintended disappointments around the timing of events and related communications.  From a communications standpoint, the Company has been hindered in our capacity to substantively provide continuous updates to investors over the past several months as the most significant and meaningful updates that matter to the capital markets have centered around both the completion and findings of the independent investigation led by the Special Committee and the pending annual financial audit led by our independent auditors.  An important element to stress is the autonomous nature of these independent processes; which explains why we were limited in our ability to communicate with the markets.

Full statement here, our story below.

NQ Mobile Inc (ADR) (NYSE:NQ) stock plunged on Friday after the company made a few announcements that sparked controversy. Then short-selling firm Muddy Waters issued another report on the Chinese company, suggesting that company management sold off shares illegally before making that announcement.

NQ Mobile

Muddy Waters continues attack on NQ Mobile

The firm alleges that NQ Mobile’s management held back the announcements so that “insiders and their proxies could illegally dump more shares at existing shareholders’ expense.” Muddy Waters also suggests that the company is “again misrepresenting the true state of its audit and relationship with PwC [PricewaterhouseCoopers]  Zhongtian.” The firm doesn’t believe PwC will ever issue an “unqualified audit opinion” for last year.

On Friday, PricewaterhouseCoopers requested a broader scope of its independent investigation of NQ Mobile’s accounting practices. The company also revealed a number of board changes—changes that at least one buy-side investor believes suggest a buyout or big investment could be in the company’s near future.

Speculations about NQ Mobile’s strategy

Seeking Alpha contributor Trade Star notes that all of NQ Mobile’s new board members have experience running private companies or taking public companies private. The new directors are Justin Chen, has experience in mergers and acquisitions. He also worked with Ambow Education after fraud allegations were directed at it and may have had a hand in Barring Private Equity’s attempted buyout.

Max Yao also joins NQ’s board, bringing experience in leading startups and private companies. The company also retained Taek Kwon as an advisor. He has experience in buyouts and orchestrating turnarounds.

NQ becomes more shareholder-friendly

In addition, the company announced a new board seat that will be focused on shareholder representation. The author believes this means that the company will be adding a new investor. He thinks that one of the Chinese company’s current shareholders will take this seat. However, he suggests also that it could be a seat demanded by a “material investor” and states that a big reason to become more shareholder-friendly is to attract a new major shareholder.

NQ Mobile also said it is partially selling off NationSky and FL Mobile, which he believes means the company is offering valuation guidance to any party interested in acquiring it. The Seeking Alpha contributor notes that the company’s announcements about these sales “was generally mixed if not negative” and that NQ is trying to unlock value for shareholders and possibly potential suitors as well.

NQ Mobile and PricewaterhouseCoopers

Last week it was also announced that independent committee head Ying Han was leaving. However, the investor notes that for the most part, the committee’s results under her leadership were “clean.” He states that she is also nearing retirement and that PwC’s audit expansion would increase her workload, while she also continues running her own company.

In addition, NQ stated that they had no disagreements with her and that PwC is still the company’s auditor. Also her departure had already been planned because the company had a replacement before it was announced.

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