NQ Mobile Inc. (ADR) (NYSE:NQ) Falls After Allegations
Following the report by Muddy Waters Research, GlancyBinkow& Goldberg LLP announced to have been investigating, on behalf of investors of NQ Mobile Inc. (ADR) (NYSE:NQ), potential allegations concerning potential violations of federal securities laws with regards to certain statements issued by the company concerning its operational and financial performance and prospects. Another law firm, Ryan &Maniskas, LLP also announced to have been investigating claims against the company.
Beijing, China based, NQ Mobile specifically offers mobile internet services and mobile security services. On Thursday, October 24, 2013 Muddy Waters, LLC published a report alleging NQ Mobile for potential exaggeration of market share and financial performance by misrepresenting the efficacy of its products.
The report issued by Muddy Waters Research specifically alleged NQ Mobile, among other things, that the company’s Antivirus 7.0 is unsafe for users and around 72% of company’s proposed Chinese security revenue is fictitious. The report claims that NQ Mobile’s actual market share is just about 1.5% in China against what it claims to be at 55%. Moreover against its purported 6 million paying China user base, the actual user base just counts around 250,000.
Following the report the stock of NQ Mobile Inc. (ADR) (NYSE:NQ) slashed its market capitalization by more than 50% which now remains only $512.95 million. But the panic extended across many of the Chinese ADRs regardless of the industry the company might be engaged in. Couple of them include, Phoenix New Media Ltd. (NYSE:FENG) – a company with market cap of $810 million that provides professional news and other content on internet, mobile and television channels – plunged by 9% on Thursday and an additional 4% on Friday. Another large cap ADR, Qihoo 360 Technology Co. Ltd. (NYSE:QIHU) with market cap of $10.11 billion also shed 5% during Friday’s trade. Qihoo 360 is engaged in providing internets services including internet and mobile security products.