NQ Mobile Inc (NQ) Drops Carson Block Off Conference Call
NQ Mobile Inc held a conference call this morning to talk about its first, second and third quarter financial results. It seems as if management didn’t want to hear from their number one bear: short-seller Carson Block. When he started to ask a question, his phone line mysteriously dropped the call.
NQ Mobile stock plunges after rally
Shares of the Chinese company’s stock plunged more than 17% at the New York Stock Exchange today after rallying on Thursday after the latest earnings report. NQ posted a third quarter loss and announced some board changes, although management said they expect revenue to skyrocket this year, increasing by as much as 66%.
This week’s earnings report covers unaudited results from the first, second and third quarters of this year. One of the big issues the company has been facing is getting its audited financial results out. The company finally filed its annual report for last year in October after two delays.
Carson Block cut off by NQ Mobile
Shares of NQ Mobile’s stock have been highly volatile since short-selling firm Muddy Waters leveled accusations of fraud against it last year. Since founder Carson Block accused the Chinese company of overstating its revenue, its stock has plummeted and remains down by approximately 75%.
Block signed in to take part in NQ’s earnings call early this morning, and management apparently didn’t like the question he was trying to ask. ValueWalk reviewed a copy of the transcript from the conference call, and it shows that Block was abruptly cut off in the middle of his question. It’s unclear whether this was just an accident, but our readers our pretty smart.
Screenshot from conference call transcript via Thomson Reuters StreetEvents
What happened to Henry Lin?
When NQ management got to the part of the call in which they take questions, Block piped up to ask about a report in the Chinese media that indicated Chairman and co-CEO Henry Lin “has been unreachable for a few weeks.”
Earlier this month, it was reported that Lin had resigned for personal reasons. Block said there was speculation in the media that Lin could be in jail because of his “links with former CCTV anchor Rui Chenggang.” He noted that no resignation letter was included in NQ Mobile’s 6-K, calling it “pretty concerning.”
At that point, Block’s question was abruptly cut off, as the operator said, “My apologies, it seems we have lost that line.
Short-Seller Block Bluffs His Way Onto NQ Mobile’s Call
By Ye Xie and Elena Popina – Dec 19, 2014
On Thursday, Block, the founder of research firm Muddy Waters LLC, initially hid his identity on an NQ Mobile conference call, presenting himself as Jim Oberweis Jr., an investor who was once the company’s second-largest shareholder. Block was then chosen to ask the first question of company executives before his line cut off, according to a transcript of the call.
“Your first question comes from the line of Jim Oberweis Jr.,” the operator said, following more than 30 minutes of presentations from company officials, according to the transcript. “Please go ahead.”
“Yeah. Hi. Actually, this is Carson Block,” the short seller said.
Block went on to ask why NQ Mobile, which is down more than 80 percent in New York trading since he made his fraud allegations, hadn’t discussed the status of former co-chief executive officer Henry Lin, whose whereabouts has been the subject of Chinese media speculation since his Dec. 10 resignation.
Given that there was no resignation letter in the company’s filings, “this is pretty concerning,” Block said before his phone line dropped.
“Unfortunately, NQ cut off the question,” Block said in an e-mailed response about the exchange to Bloomberg News. His spokesman Zach Kouwe said Block misrepresented himself initially because in the past NQ Mobile executives have refused to call on him during the question-and-answer period.
Shares of the Beijing-based company sank 19 percent to a three-year low of $4.09 on Friday in New York. NQ Mobile, which concluded an internal probe that didn’t find any evidence of wrongdoing in June, provided unaudited financial results for the first three quarters of 2014 Thursday after months of delays. It also announced it was selling its FL Mobile game unit for as much as $630 million.
Kim Titus, a spokesman for NQ Mobile, didn’t reply to an e-mail and phone calls seeking comment on whether the company had cut off Block on purpose and whether it has prevented him from asking questions in the past.
NQ Mobile co-Chief Executive Officer Omar Khan did go on to address Block’s question last night after the short seller was dropped from the call.
“I want to actually answer Carson’s question,” Khan said before adding that Lin’s departure was due to personal reasons unrelated to the company.
Jim Oberweis, president of Oberweis Asset Management Inc., declined to comment in an e-mail. His firm sold its entire 1.3 million-share stake in the third quarter, according to a filing with regulators in November.
“It’s a rather odd situation and surprising” that Block appeared on the call, said Drew Bernstein, principal of Marcum Bernstein & Pinchuk LLP, which is NQ Mobile’s auditor. “Irrespective of who asked the question, I thought it was a legitimate question and I give Omar credit for addressing it,” said Bernstein, who participated in the call.
Lin’s departure, announced on Dec. 10, follows the exit of NQ Mobile’s chief financial officer in August, the resignation of its audit panel chairwoman and the dismissal of its auditor in July. NQ Mobile filed its 2013 annual report in October after delaying it twice.
NQ Mobile Inc Dumped By Uber Bull Oberweis
by Michelle JonesNovember 14, 2014, 2:23 pm
After a rough couple of trading days, NQ Mobile Inc ADR shares edged upward by nearly 2% during regular trading hours today at the New York Stock Exchange
A former NQ Mobile Inc (NYSE:NQ) bull has dialed down his enthusiasm in the company—completely. Regulatory filings show that Oberweis Asset Management Inc, the firm managed by Jim Oberweis, closed out its position in the controversial Chinese company sometime during the third quarter.
Oberweis versus Muddy Waters
It appears that after more than a year of accusations from short-selling firm Muddy Waters, Oberweis has changed its view of NQ Mobile. Carson Block, founder of Muddy Waters, has been accusing the Chinese company of accounting fraud.
In last year’s third quarter, Oberweis doubled down on its stake in NQ Mobile Inc (NYSE:NQ), adding to the approximately 990,100 shares it held to bring its stake up to 1.8 million shares on Sept. 30, 2013. This means that as of Sept. 30 of last year, Oberweis was NQ’s second-biggest shareholder, according to data collected byBloomberg.
What a difference a year makes
During this year’s third quarter, Oberweis emptied its holdings of all the nearly 1.35 million shares of NQ Mobile it had previously held, finishing the slow selloff it had begun prior to the quarter. In the firm’s December 2013 letter to investors, a copy of which was reviewed by ValueWalk, Oberweis management called NQ Mobile Inc (NYSE:NQ) possibly “the best Christmas gift” they could have given to their investors.
They also called Muddy Waters’ initial report on the Chinese company “bunk,” and “nonsense,” saying that they decided at that time to essentially “load up the truck” because they believed NQ Mobile had “high growth prospects, a strong balance sheet, and an absurdly cheap stock valuation.” Specifically, regarding NQ Mobile, the letter stated:
Very rarely do we fi nd ideas with high growth prospects, a strong balance sheet, and an absurdly cheap stock valuation.
That is, you can’t usually have your cake and eat it too. In one case, however, you can!
Obweiss noted further:
Buying NQ shares at $13 may be the best Christmas gift we can give you. On behalf of our clients, we have already bought another 900,000 shares after the report came out, bringing OAM’s client ownership to over 1.8 million shares.
NQ has set up a special independent committee comprised of a world-class legal team and a forensic auditing team.
This investigation will be complete in a couple of months. We believe that once complete, NQ shares are very likely to trade materially higher than their current price of $13. Management has announced they’d personally be buying back shares. Shares trade for 10x forward earnings with 30% growth.in Hong Kong from their convertible debt offering in October). Net of the convertible bond proceeds, NQ has $2.60/ADS in cash. You don’t have to believe in the Tooth Fairy, but some basic due diligence will likely convince you that Muddy Waters’ fear mongering has created an exceptional mispricing in the market.
Shares of NQ Mobile are trading at $7.39 at the time of this writing. The stock has not reached double digits during the entire quarter, so the firm likely lost money on the investment.
Tired of waiting on NQ Mobile?
A big question now is whether Oberweis is just the first of many investors that will abandon ship on NQ Mobile Inc (NYSE:NQ). The company still has three quarters’ worth of financial filings to release as it deals with continuing accounting problems. Earlier this month, NQ told investors that it intended to file its three quarterly reports as soon as possible, without giving an exact time frame.
Short-seller target NQ Mobile dismisses independent auditor
Fri Jul 18, 2014 12:13pm EDT
(Reuters) – NQ Mobile Inc, a Chinese mobile security software maker facing allegations of fraud from short-seller Muddy Waters Research Group, said it dismissed PricewaterhouseCoopers Zhong Tian LLP as its independent auditor.
NQ Mobile shares fell as much as 21 percent in early trading before reversing course to trade up almost 15 percent by midday.
PricewaterhouseCoopers Zhong Tian told NQ in June that it needed to expand the scope of the company’s 2013 audit, days after NQ said an independent committee had found no evidence of fraud.
Earlier this month, Muddy Waters alleged that the company was misrepresenting the true state of its audit and relationship with PwC Zhong Tian. (bit.ly/1kCSHGw)
NQ did not give a reason on Friday for the dismissal of PwC Zhong Tian, but said it had hired Marcum Bernstein Pinchuk LLP as its new auditor.
“PwC’s refusal to issue an audit opinion results from the fact (that) NQ is a fraud,” Muddy Waters founder Carson Block told Reuters in an email. “By not issuing any opinion, PwC effected a backdoor resignation that attempts to save face for its client.”
NQ’s stock has been volatile since Muddy Waters made the allegations in October, plunging from a high of $25.90 just before the report was released to a low of $4.13 earlier this month.
The stock is heavily shorted, with more than a quarter of its outstanding shares in short positions.
Short-sellers make money when the stock price of a company drops. They sell borrowed shares in the hope of buying them back at a lower price, returning them to the lender and pocketing the difference.
Muddy Waters’ previous targets include U.S.-listed Chinese companies such as the now-bankrupt Sino-Forest and Longtop Financial Technologies, which gained notoriety for fraudulent reporting and asset stripping.