Since going public, NQ Mobile has been a target of many short sellers and bloggers. The Muddy Waters ("MW") report that came out on October 24, 2013, was just another report that rehashed the same old arguments that others (J Capital, Goldbaum Research, Regal Point Capital, etc.) have tried to make into a problem.
NQ Mobile has responded to these malicious attacks and allegations by publishing reports to refute these allegations.
The Company held a two hour special conference call in which they defended themselves and took questions from investors and analysts. The Company formed a committee to review its finances, welcomed auditors to double check everything and posted copies of bank statements to show the investment community that they do have cash. Here is what NQ Mobile said during the special conference call (4:30-5:15).
"The truth and the facts are on our side. ...as we all broke into our respective product groups and areas, (we) started to work through the many different things that needed to be done to address the malicious and false attacks. There was great team work. See it is in those moments when true colors shine. It is in those times when people, when teams, and when companies set themselves apart. I'm extremely proud to be part of this team. We all collectively feel like the opportunity is finally here, once and for all, to end the constant rehashing of many of the same old concerns and same old questions. To once and for all change the mindset of the investment community."
So why is the recent MW report a good thing for NQ Mobile in the long run? The last paragraph (in bold) says it all. Management wants to settle this once and for all. Can you blame them? I would be tired if I had to defend myself from the same baseless accusations that hold no merit.
NQ Mobile has responded countless times to these attacks, yet short sellers continue to bring up the past with rehashed arguments and concerns. Look no further then what happened yesterday, as three SA articles were published talking about the same old concerns and questions that management has already put to rest. The way that NQ Mobile has responded to all of these allegations shows there is a good possibility that short sellers will be eating their words.
Management is now focused on using the national spotlight to show the entire investment community that it's in fact a reputable and fast growing company.
In The Spotlight
The attention NQ Mobile has received from all the recent drama has brought with it many advantages. One of the biggest advantages from being in the spotlight is all the free advertising and brand awareness that comes with it. Of course, being in the spotlight for the wrong reasons (being accused of fraud) won't improve your brand image for the time being, it does improve your brand awareness.
Like I've said in previous articles, I'm a believer in bad publicity is still good publicity as NQ is now visible to an even broader range of investors. We are starting to see this as new investors are coming into the picture. In just the last couple of weeks, Hedge Funds have disclosed big stakes in the Company, owning more than 22%.
Some investors have directly contacted me and told me they are some of the new investors in the Company. They proceeded to tell me the attention that NQ Mobile has received is what brought them to the Company. Many of them are thankful for the MW attack as they now are able to purchase shares at a very steep discount.
While shares are still off 40% from highs reached in October, shares are still up over 120% for the year. Even though shares have been hit hard in the short term, looking long term, NQ Mobile will be better off from all of this.
There is no doubt that investors are waiting on the biggest catalyst the Company has ever had (the new audit report). If the audit comes back clean, (which I believe it will) the company will be able to move forward from the constant rehashing of the same old arguments made by the shorts.
Instead of wasting time refuting false allegations, the Company will be able to use its time building on its platforms and increasing shareholder value. NQ Mobile has blown out analyst expectations for a couple of quarters now, imagine what they could do when they're able to devote all of their time to the business.
In conclusion, I'll leave you with a quote from Matt Mathison, Vice President of NQ Mobile.
"As ridiculous and (false) to many allegations from the recent short-seller report and coordinated other blog posts are, we are determined to provide the marketplace with transparency and action. We are energized and resolved to grow stronger from this attack."
As always, I'm providing you with my track record and other particular stocks that I like. The link provided will show you all of my picks, how they have fared, and where I think they will be going in the near future. I think you will find my track record to be very impressive and useful.
Disclaimer: I would like to thank fellow SA contributor tradestar2012 for his involvement in this article. Investors are always reminded that before making any investment, you should do your own proper diligence on any stock mentioned in this article.
Disclosure: I am long NQ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.