October 22, 2020

Short-seller’s NQ Mobile report to ‘hurt’ IPOs of Chinese firms in US


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nq_mobile_0Bloomberg in New York From scmp

Short seller Muddy Waters’ call to sell shares of Chinese mobile-security service provider NQ Mobile will hinder initial public offerings from the country, private investment banker Needham & Co says.

Shares of NQ Mobile dropped as much as 63 per cent in New York on Thursday before trading was halted.

Muddy Waters, a research firm founded by short seller Carson Block, initiated coverage of NQ Mobile with a strong sell rating, saying the company inflated sales.

In 2011, Block accused Sino-Forest and Focus Media of inflating their financial statements.

Travel-booking website Qunar Cayman Islands and online marketplace 58.com plan to launch their initial public offerings in the United States next week.

“This just kind of fans the flames again,” said Rudy Balseiro, the managing director of equity capital markets at Needham. “Whether it’s true or not doesn’t matter, it’s the perception that this is still going on that will strip out some of the guys who were getting comfortable with the Chinese IPOs.”

The plunge cut NQ Mobile’s market value by US$561 million, after its American depositary receipts had gained 279 per cent this year by Wednesday. The depositary receipts dropped 47 per cent to US$12.09 before trading was suspended.

“We believe it is a zero,” Block, wrote in an e-mailed report on NQ Mobile on Thursday. “At least 72 per cent of NQ’s purported 2012 China security revenue is fictitious.”

NQ Mobile’s market share in China was about 1.5 per cent, against the about 55 per cent it reported, Block wrote. Its China paying user base was less than 250,000, against the 6 million claimed.

NQ Mobile rejected the allegations, saying the company would respond with more detail.

Qunar plans to begin trading on the Nasdaq Stock Market on November 1.

PHOTO: Muddy Waters started coverage of NQ Mobile with a strong sell rating. Photo: SCMP Pictures

This article appeared in the South China Morning Post print edition as Sell-off call to ‘hinder’ Chinese US listings

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