NQ Mobile Inc (ADR) (NYSE:NQ) announced this morning that Chief Financial Officer KB Teo resigned. He cited family reasons rather than anything to do with the ongoing controversy surrounding the company. However, not everyone is convinced of that the reason for the resignation is as simple as that because it follows a couple of other key departures.

NQ Mobile

Shares of the Chinese company recovered at the New York Stock Exchange today after opening lower. Some investors seem unperturbed by yet another incident which short-sellers are taking as a sign that their thesis of fraud is correct. There’s also the suggestion that the stock ended higher today due to a short squeeze.

Regal Point adds to short

Muddy Waters kicked off the debate about NQ Mobile, but Carson Block’s firm isn’t the only one taking a major short position in the Chinese company. We’ve also been following Regal Point Capital’s short of NQ, and spokesperson Kristen Compton notified ValueWalk today via email that they took the opportunity to add to their short.

She added that the Chinese company is now the biggest short position in the fund and that they’re debating about which will happen first: whether the company will be delisted or whether there’s another big resignation.

NQ Mobile faces short squeeze?

Regal Point Chief Investment Officer Vijay Marolia tells ValueWalk that his firm has been buying put options in NQ Mobile. He thinks the reason the Chinese company’s shares closed slightly higher today is because of a short squeeze. If he’s right, then it means that not all short-sellers are as convicted of their thesis as he is. Or they could simply have taken advantage of this morning’s slump to cover their position. He notes that more than a third of the float is sold short and that the daily turnover is more than 15%.

“That does not inspire confidence,” Marolia told ValueWalk in an email. “That tells me that shareholders are scared to death and looking for a way out. And don’t hold your breath for the ‘Bison buyout’—I doubt it will close.”

Will NQ Mobile be delisted?

Of course he’s referring to the nonbinding buyout offer from Bison Capital, a relatively unknown China-based firm that said it might be interested in NQ Mobile. But Marolia thinks the company will end up being delisted rather than bought out. In his view, NQ is worth less than $2 (he’s actually generous, as Block says it’s worth less than $1), and he says it’s a “binary” situation.

“It’s either a legit company, in which case it’s worth much more than the current offer from Bison (whoever they are), or they are a fraud, in which case it’s not worth very much at all,” Marolia said. “I don’t think there’s a middle ground here.”

NQ Mobile’s other resignations

In his view, NQ’s CFO “really did resign for ‘family reasons’—he doesn’t want to be convicted of fraud for his family’s sake.” You may remember that Teo’s resignation follows a few other key departures. NQ Mobile fired PricewaterhouseCoopers as its auditor, and the head of the audit committee also resigned, citing personal reasons just as the CFO did.

It’s going to take some time to see if the very vocal short-sellers are right about NQ Mobile. The company certainly makes for an interesting story that seems to get stranger and stranger by the week.