NQ Mobile Inc (ADR) (NYSE:NQ) shares have fallen by 51% since short seller Carson Block accused it of being a Chinese fraud. Nonetheless, the stock’s going to have to fall even further if most of the investors who bought bearish options that expire May 17 are going to see a return on their investments.
NQ Mobile options expire after deadline
May 17 is a key date for NQ Mobile Inc (ADR) (NYSE:NQ) because it’s two days after the Chinese company said it would complete an investigation into the claims made by Block. He accused NQ Mobile of overstating its revenues. Bloomberg Businessweek reports that there are some 345,000 bearish options out on NQ Mobile right now, and approximately two-thirds of them expire by May 17.
The most popular put contracts will earn money if shares of NQ Mobile Inc (ADR) (NYSE:NQ) plunge 46% from last night’s close The stock is on its way, but still a far cry from that. The number of shares sold short is now 26% of the company’s outstanding shares. This is the largest number among the most popular Chinese companies listed on U.S. exchanges.
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Currently the number of bearish options on NQ Mobile Inc (ADR) (NYSE:NQ) that expire this week is approximately 226,000 contracts, which is triple the number of bullish contracts, according to Bloomberg data. The media company reports that puts with a $6 strike price have the most interest at over 97,000 contracts. It’s been more than a year since shares of NQ Mobile were trading at that level.
NQ Mobile investigation results due tomorrow
Shearman & Sterling LLP and Deloitte & Touche Financial Advisory Services Ltd. are leading an investigation of NQ Mobile Inc (ADR) (NYSE:NQ)’s finances. The results of that investigation will likely be a major catalyst for NQ Mobile stock—either upward or downward. The investigation will be a key judgment on whether Carson Block is right about NQ, or whether he’s wrong.
In a statement released on April 30, NQ Mobile Inc (ADR) (NYSE:NQ) said the team it had hired (Shearman and Deloitte) had not yet found any evidence that it was overstating its revenue. The company pushed back the filing of its annual report 15 days so that it could wait for the results of the investigation. In an email sent to Bloomberg, Block said the delay basically means that “if NQ manages to receive an unqualified audit opinion, it will have been by the skin of its teeth.”