PwC Has Not Resigned: NQ Mobile Inc

NQ Mobile

NQ Mobile Inc (ADR) (NYSE:NQ) stock took a dive after a tweet apparently posted by Xinhua English News (since taken down, h/t QtR at SeekingAlpha) that PricewaterhouseCoopers had resigned as the embattled Chinese tech company’s auditor. The stock price fell more than 5% to $7.74 before NQ Mobile denied the report. NQ Mobile supporters allege that the tweet was intended to harm the company’s stock price.

“PwC has not resigned,” NQ Mobile wrote in a statement that was more important than its brevity might imply.

Missing information has investors on edge

NQ Mobile Inc (ADR) (NYSE:NQ) has been the target of a short campaign by Carson Block at Muddy Waters since last year, when he accused the company of cooking its books. Block has had a lot of success shorting Chinese companies, though many of his past targets used reverse mergers to get listed in the West, a tactic that is prone to abuse because it sidesteps some of the regulatory hurdles that come with getting listed and holding an IPO, while NQ Mobile was listed through the normal IPO process.

NQ Mobile Inc (ADR) (NYSE:NQ) agreed to hold an independent investigation into its finances, and its stock price got a boost when a special committee made up of NQ Mobile board members, the law firm Shearman & Sterling LLP, and Deloitte & Touche Financial Advisroy Services Ltd. issued a report saying that there was no sign of fraud. But the stock has been losing ground since then as investors have realized that NQ Mobile may have interfered with the investigation. Block has said that because the independent committee hasn’t released details of the investigation, it’s impossible to know what information is missing and what that might mean for the company.

In that context, the resignation of PwC would have been a huge blow to NQ Mobile Inc’s (ADR) (NYSE:NQ) case, and the sell-off that ensued shows how nervous long investor are already. The stock price will likely drift back up now that the rumor has been addressed, but many people are upset that NQ Mobile wasn’t on top of the rumor within minutes (surely someone noticed the plummeting stock price?).

NQ Mobile evades questions about sale of minority stake in FL Mobile

In the same blog post NQ Mobile Inc (ADR) (NYSE:NQ) also said that its management team is aware that “the filing of our annual audit is the single most important focus for the marketplace and we are doing everything we can to finalize this as soon as practicable.”

The company also addressed the sale of a minority stake in its FL Mobile subsidiary, simply asserting that it is looking for new ways to unlock shareholder value and that it is also considering an IPO for FL Mobile in the next year. Such a vague explanation might not have sufficed if the company wasn’t under such harsh scrutiny, but it is certain to disappoint when people are already suspicious.

Correction: The original article incorrectly attributed the special committee report to PricewaterhouseCoopers. The article was also updated to specify that NQ Mobile went through a normal IPO process.

For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)

About the Author

Michael Ide
Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.

2 Comments on "PwC Has Not Resigned: NQ Mobile Inc"

  1. Any reason why the corrections from the below comments were not implemented into this article? They can be substantiated fairly easily.

  2. There are a few things wrong with this blog post. Not that value walk cares as it appears it’s just another group supporting the Short and Distort campaign.
    1. The real Xinhua English News did not tweet the resignation of PWC. It’s a fake account the tweet came from a fake account masquerading as Xinhua English News for the sole purpose to destroy NQ and add downward volatility on select days of coordinated attacks on stock price. This is blatantly obvious but you are writing as if it was a legitimate source rather than exposing the truth.

    2. Quote the Raven was explicitly told it was a fake twitter account yet proceeded with writing an article, tweeting the fake “breaking news” in order to link his erroneous article! Yet you do not expose the obvious nature of his tactic.

    3. Carson Block had success with reverse merger IPO’s but why are you not telling your readers that NQ did NOT go public via a reverse merger. Rather you are implying that if he has success with past reverse mergers there is a chance he will be successful here. Rather than exposing the truth that his record against normal IPO companies has been pitiful at best. Again providing a disservice to shareholders.

    4. You state that PWC issued a report. Again wrong information. The special committee was comprised of the law firm, independent directors of the company and Deloitte & Touché. The report issued last week came from them. Sure PWC had this report and was aware of it but it did not come from them.

    5. With respect to the entities that received direct investments. This is subject to opinion but think of it this way. Does a Venture Capitalist generally invest in public shares of a company? No they do not, it is not their mandate.
    Moreover there is a disconnect to what NQ is worth provided they are clean and what they are trading at now. The only way to quantify the values of the subsidiaries right NOW would be through this method and it is a fair market value for each subsidiary. This is indisputable. Would the VC make more money by investing in the stock, immediately speaking, probably but what good is that to the situation where the company knows and feels they are undervalued? For shareholders this was the best option. That being said it would not be a bad option for a strategic investor or acquirer even to buy shares in the open market. Hopefully this is on the works as it would further provide confidence.

    So in closing if you are going to write about any company get your goddamn facts straight and stop twisting things or implying things that are unquestionably inaccurate.
    That is if you want to be taken seriously.
    If you’re on the take by King Carson then by all means do what you’re doing and at some point providing false information will CATCH UP TO YOU!

Leave a comment

Your email address will not be published.