Portfolio Manager Sees Many Troubling Signs With NQ Mobile

| About: NQ Mobile (NQ)

Recently a contact of ours had put us in touch with a portfolio manager in Hong Kong who took a look into NQ Mobile (NYSE:NQ) after the Muddy Water allegations of fraud to see if the stock was a worthwhile investment. This portfolio manager was gracious enough to briefly speak with us and discuss some of his findings and opinions while also answering some of our follow up questions via email.

He holds no position in NQ Mobile at the time when we talked to him but was concerned with many of the things he saw and feels that there are too many brazen and troubling signs with NQ Mobile to be a coincidence. He was also kind enough to agree to let us publicly share and expand on some parts of what he had told us.

NQ Mobile Has a History of Being Accused of Defrauding Their Own Users

The portfolio manager we talked with also shared our view that NQ Mobile has what appears to be some very shady business practices in the past and is often regarded as a rogue software company by many in China. The CCTV report on NQ Mobile (known as NetQin back then) and their now wholly owned subsidiary Feiliu (FL Mobile) infecting their own users with viruses and asking them to pay in order to remove the virus is pretty well known by now.

While NQ Mobile refutes the claims in the CCTV exposure as false, complaints about their billing practices can be readily found online. Just a quick search query brings up numerous complaints on Baidu against NQ Mobile. This includes many users complaining or asking why they have been charged by NQ unknowingly or without their consent. There are also some users complaining that even after uninstalling NQ's mobile security software they were still being billed monthly by the company.

Also given the small monthly charges of around 2 RMB (USD $0.33) per month from NQ, the portfolio manager suspects many smartphone users in China who don't look closely at their cell phone bill may not even be aware they are being billed by NQ Mobile every month for their mobile security services.

Furthermore we previously just assumed most of NQ's shady business practices were limited to solely China and other Asia regions but we may be mistaken. Recently an individual let us know that on a RadioShack support forum for mobile products they sold, a store employee discovered that the NQ Mobile Security app preloaded on some Cricket phones sold at RadioShack would shut off the phone's data services and prevent access to the internet. Meanwhile the preloaded NQ app would ask users to pay for their premium service. As a result some non-tech savvy individuals might end up having to upgrade and pay for NQ Mobile Security before their phone's data services would work properly as intended.

NQ Mobile May Also Be Illegitimately Billing Dormant Supplementary SIM Cards in China

According to the portfolio manager there's also exists the possibility of NQ Mobile billing many supplementary SIM cards in China who aren't actually using their apps. He stated that after talking with those in the industry, this is one of the few plausible explanations why the brand recognition of NQ Mobile is so low among smartphone users compared to the revenue and paid users they claim to have.

Based on what some in the industry has told him, the portfolio said that secretly billing dormant supplementary SIM cards is a dark area of the mobile industry in China many outside the industry may not know about. The portfolio manager said that the three state-run carriers in China: China Mobile, China Telecom, and China Unicom all have plans which includes supplementary SIM cards. These supplementary SIM cards often come complimentary with higher minimum spending limit plans from the carriers. Some people give these extra SIM cards to family members to share the data plan with or install them on any extra phones they may have. Other times though a lot of these supplementary SIM cards remain dormant and aren't even installed in a phone for whatever reason.

Many of these supplementary SIM cards however have minimum monthly spending amounts themselves. The minimum amounts are usually pretty small such as around 10 RMB (US $1.65) per month. Therefore even if no charges are run up on the supplementary SIM cards for the month, the entire 10 RMB minimum spending limit still gets charged to the main user account. And as long as the main SIM card under the plan is active, these supplementary SIM cards will continue to be billed to the account of the main SIM card monthly. The portfolio manager said that while no one aside from the carriers knows how much are being billed to dormant or underused supplementary SIM cards, it is estimated it can be as high as between 1 billion to 10 billion RMB annually.

Therefore many shady mobile value added service (MVAS) companies and their service providers (NASDAQ:SP) in China would forge close relationships with executives from the Chinese carriers so they can have their mobile services secretly billed on some of these dormant supplementary SIM cards every month. These mobile service companies would set the monthly billing prices to a small amount under the minimum spending limit, say 2 to 5 RMB per month. So those paying their cell phone bill won't notice any extra charges or pay more than they usually do.

However the portfolio manager explained aside from legal implications of this business practice, it would usually require bribes to executives of the telecom carriers (possibly at the province levels) to accomplish. Although he said bribes aren't anything new or surprising for the telecom industry in China seeing how many executives have been publicly exposed and sentenced.

Here some instances of bribery cases of China Mobile executives that we found.

Zhang Chunjiang, a former Vice Chairman of China Mobile, was actually sentenced to death for accepting over $1.15 million in bribes.

Shi Wanzhong, a former Human Resources Director of China Mobile, was also sentenced to death for fixing business deals and accepting over $5.06 million in illegal middle man commissions.

Li Hua, a former chairman and general manager of the Sichuan branch of China Mobile, was sentenced to death for accepting more than $2.5 million in bribes

Lu Xiangdong, a former Vice President of China Mobile, got a life sentence for accepting over $4.1 million in bribes.

Xu Long, chairman of China Mobile's Guangdong branch, and Sun Lian, head of the purchase department for the Guangdong branch, are currently under investigation for corruption.

In the past four years a total of 12 high level officials at China Mobile have been removed because of corruption charges. This does not include many more middle and lower management bribery cases which often does not make the news.

While looking up corruption cases in the telecom sector in China we actually discovered a Chinese news article claiming that NQ Mobile had close ties with Zhang Chunjiang and Lu Xiangdong, the two former China Mobile executives who were sentenced to death for corruption.

In addition NQ Mobile is currently providing mobile anti-malware and security services for the Guangdong branch of China Moible. This is the branch where the chairman Xu Long and other executives are being investigated for corruption.

It seems NQ Mobile often says they have a close relationship with China Mobile and the other telecom operators in China. However even if this is true, given the rampant corruption cases relating to China Mobile it is prudent for investors to question were all the relationships generated lawfully and legitimately?

NQ Mobile May Be Tricking Some of Their US Executives As Well

When looking at the executives in the Dallas office of NQ Mobile, you can see there are a number of former Samsung America executives working there. According to the portfolio manager we spoke to, it seems to him this is likely a ploy created by the Chinese executives at NQ in order to give the appearance they are a legitimate operation to US investors.

Omar Khan was officially hired by NQ Mobile on January 5, 2012 to be their Co-Ceo. Prior to NQ and Citigroup, Khan worked as Chief Strategy Officer and Chief Product & Technology Officer for Samsung from 2008 to 2011. He is well known enough in the mobile industry and sometimes called the "The Godfather of Samsung Galaxy" since he often presented the early Samsung Galaxy models on stage. This makes him a perfect candidate to lend credence of NQ Mobile being a legitimate operation.

The portfolio manager said that Omar Khan may have done some decent work at Samsung during the early days of Android. However he could not see any other publicly traded company with a significant mobile related business offering him the title of CEO in addition to such a generous compensation package as NQ Mobile did.

While the portfolio manager can't say for certain whether or not Khan is aware of or complicit in any possible fraud going on at NQ Mobile, he believes without a doubt it is Khan who helped recruit a slew of his former Samsung colleagues to work at NQ. He stated that the former colleagues mostly likely trusted Omar Khan and didn't look too deeply into whether all of NQ Mobile's business were legitimate or not. As more former Samsung America employees moved to NQ it made it easier and easier to convince other employees from Samsung as well as other well known companies with mobile related businesses to join.

Here is a partial timeline we compiled:

Soon or around the time Khan arrived at NQ Mobile in the beginning of 2012, he also brought along Kim Titus, a former PR director at Samsung, with him to run PR for NQ.

In April of 2012, Gavin Kim became Chief Commercial Officer at NQ. From 2008 to 2011, Gavin Kim had worked closely with Khan at Samsung America as Vice President of Consumer & Enterprise Services.

In May of 2012, Conrad Edwards who was Vice President and Chief Experience Officer at Samsung became Chief Experience Officer at NQ Mobile.

At the same, Victoria Repice, a Senior Director of Product Management at Samsung was recruited for the same position in NQ in Dallas.

In August of 2012, Gerado Gean, a product designer for Samsung, went over to NQ as a creative director and product designer.

According to the portfolio manager having these former Samsung employees working in the US made it much easier to convince many investors in the US that NQ Mobile was a legitimate mobile business with potential seeing how Samsung is the largest smartphone maker in the world. And he said that it is perfectly logical that the Dallas based operations in the US are completely legitimate. However he explained these former Samsung executives now working for NQ may be unaware of any possible financial fraud occurring back in China.

For one, it is because the majority of the books, cash, and assets of NQ Mobile are being controlled by the Chinese executives back in Beijing, China. Second none of these executives come from a financial background but rather they have engineering, programming, product design, and marketing backgrounds.

As a result the portfolio manager believes that it is possible some if not all of the American executives at NQ Mobile are being mislead or being tricked by the Chinese executives into joining the company and are in turn unknowingly helping them mislead investors.

NQ Mobile's Recent CFO Change Is Extremely Concerning

The portfolio manager we spoke to was also extremely concerned with the recent CFO change at NQ Mobile after digging around. We had mentioned the abrupt CFO change at NQ Mobile seemed suspicious in our first article on the company back in on October 1, 2013. For those unaware on September 20, 2013 , NQ Mobile's announced that Suhai Ji was being replaced by KB Teo as CFO. KB Teo was the leading investment banker for NQ Mobile's IPO at Piper Jaffray Asia, the underwriter for NQ's public offering. Also the news of the CFO change was tacked onto the end of a press release raising the company's guidance.

This seemed very strange to the portfolio manager we contacted since he said he has never seen a lead banker for the IPO of a company become their CFO a year or two later. Therefore he took a closer look into the matter and asked around. It seems Suhai Ji was originally hired by NQ Mobile in November 2010 as their CFO with the main intent of helping the company go public. Suhai Ji use to work for NYSE Euronext, Deutsche Bank, Merrill Lynch, and JP Morgan prior to joining NQ. So he had lots of investment banking experience.

Now NQ Mobile never publicly gave a reason why Suhai was leaving or being replaced as CFO. But when privately asked they stated it was because he was being poached by other companies which also had ambitions of going public after seeing him successfully guide NQ through their IPO. This sounds plausible enough on the surface since Suhai now works as CFO for Tarena International, a Chinese IT and software training service provider. Based on industry talk it appears Tarena does have plans for IPO'ing as soon as next year.

However after having people speak with some employees of Tarena and others familiar with the company, the portfolio manager got the sense that it was Suhai Ji who approached Tarena for the job rather than he was being poached as NQ claims. If NQ Mobile is really the rapidly growing, legitimate company with a bright future as they claim to be, it is hard to see why Suhai Ji would want to leave. Also when he left NQ Mobile, Suhai Ji didn't offer any of the usual customary positive commentary (such as he enjoyed working for the company, the future for the company remains bright, etc.) a high level executive leaving a company would often provide in a company press release or interviews. In fact it seems Suhai Ji has mostly refused to comment on his departure from NQ when asked by the media.

This is why the portfolio manager we talked to believes that Suhai Ji left NQ Mobile as a result of discovering something troubling enough about the company. He also believes this ties into why KB Teo was brought in as their new CFO. Speaking around with others in the industry he heard rumors that when KB Teo was the lead banker for NQ's IPO, Teo actually discovered some serious enough concerns which could of halted the IPO process in many cases. However either due to Teo's close relationship with executives at NQ or for other reasons, Teo continued on with the IPO and ignored or whitewashed those issues.

Now he believes that NQ Mobile brought KB Teo in as their new CFO to help conceal or cleanup those issues given his familiarity with the company. After speaking with others, the portfolio manager also believes that after Piper Jaffray HQ in San Francisco looked closer into NQ Mobile due to the fraud allegations from Muddy Waters and discovered these facts, they decided to supsend their rating on NQ Mobile for this reason among others.

Reports Saying NQ Mobile Has Significant Market Share in China Possibly Misleading or Inaccurate

After having some reporters speak with employees from various companies that produce mobile security apps in China, the portfolio manager told us that he feels many of the research reports saying NQ Mobile has significant market share in China are possibly either misleading or inaccurate. This includes reports which say NQ Mobile has over 20% market share to as high as over 50% for mobile antivirus and security in China.

He explained to us to begin with that many market share data reports released for various industries in China aren't completely accurate or reflective of the entire country. Often this is due to the extremely large population of the country and data gathered from tier 1 cities can vary significantly from tier 2, tier 3, and lower tier cities.

However he also said in China it is not uncommon for firms and organizations conducting market share research reports to be financially incentivized by individual companies to help overstate market share for them. In some cases the research report might by sponsored entirely by an individual company. Therefore the researchers may use a certain methodology which grossly favors an individual company to as extreme as just flat out lying.

The portfolio manager gave us the example of the mobile security market share reports released from a Chinese university called the Central University of Finance and Economics in Beijing. Their market share reports released for mobile security often state that NQ Mobile has over 50% market share in China. He said he looked into this and it appears that NQ Mobile has a fairly cozy relationship with the Central University of Finance and their staff while also recruiting employees from the college. In addition, he said the NQ is a likely a significant donor to the university and might even be helping sponsor their research reports.

We also did a little digging ourselves after being told of this and it does appear there is close relationship between NQ Mobile and the Central University of Finance. From publicly available information we found that NQ Mobile has a scholarship and fellowship program at this university. NQ Mobile was also recently allowed to host campus events at this university promoting their products in October. Here is a Chinese article dated December 20, 2013 talking about NQ Mobile awarding their "NetQin Innovation Scholarships" to students at the Central University of Finance. At the end of article it also said that NQ Mobile would be hosting a series of campus activities at the university in the future.

Limited Growth Prospects For Any Legitimate Consumer Mobile Security Business

The portfolio manager we spoke with also believes that whatever amount of real consumer mobile security business NQ Mobile has, there's not a whole lot of room for growth left in many markets. He shared the same view as us that in China the free mobile security apps from top tier Chinese internet companies such as Qihoo 360 (NYSE:QIHU) and Tencent will continue to capture most of the entire market. We had previously discussed the completive landscape for mobile security apps in China in one of our prior articles on November 26, 2013.

As an update, in that article we also mentioned that based on our research we felt that Baidu should be launching their own mobile security app soon. We were correct in this assessment as on December 18, 2013 in China, Baidu officially launched their Baidu Mobile Guard app. The app is an update of Baidu's Android optimization app combined with mobile anti-virus and anti-malware technology from TrustGo, a mobile security company Baidu acquired earlier this year.

In addition, the portfolio manager believes there is limited growth opportunities in mobile security for NQ Mobile in the United States as well. He explained this is because Lookout Mobile Security has already partnered exclusively with 3 of the top 4 mobile carriers in the United States for pre-installation deals. This includes AT&T, Sprint, and T-Mobile. So there are almost no carriers left for NQ Mobile to partner with in the US to preinstall their mobile security app.

The portfolio manager said that Lookout will most likely do the same in Europe. He pointed out that Orange (France Telecom) has invested $20 million into Lookout back in December of 2012 and has been preloading their app on their phones. Also in October of 2013, Deutsche Telekom along with other parties including Qualcomm Ventures and Greylock Partners provided $55 million in funding to Lookout. Lookout plans to use the new proceeds to expand further in Europe and other international markets. According to the portfolio manager, it is almost too late for NQ Mobile to catch up in Europe just like they were too late to catch up in the United States.

NQ Mobile May Be Trying To Help Conceal Any Possible Fraud through Acquisitions

The portfolio manager we spoke with was able to verify that the two major acquisitions of NQ Mobile, FL Mobile and NationSky, did have some more seemingly legitimate business operations. However based on the information he gathered on NQ's mobile security business in China he believes that these acquisitions may be part of NQ's plans to help conceal any fraudulent revenue. He explained this is possibly because the limited prospects of their mobile security business would any make any inflated rapid revenue growth in that area much harder to believe in the future.

He said another possibility is NQ is trying to replace the revenue achieved through shady business practices from their original core business, such as fraudulently billing users,with businesses in other areas of the mobile industry that do have more legitimate operations. In this case mobile gaming and mobile device management.

Although the what seems to be a close relationship between NQ Mobile co-founder and CEO, Dr. Henry Lin Yu, and the founder and CEO of FL Mobile, Dr. Tony Ni, makes the portfolio manager more uncomfortable about the FL Mobile acquisition. He says the two of them should have known each other for at least a decade now seeing how they both received their PHD from the Beijing University of Posts and Telecommunications back in 2003. The portfolio manager explained that from his experience when a publicly traded Chinese company acquires a small sized company owned by a high level executive's close friend, associate, or family member, there is often double dealing or something else unscrupulous involved.

First though as clarification for some retail investors, fraud isn't an all or nothing occurrence. Meaning a company isn't either completely legitimate or completely fraudulent. Some retail investors make the mistake of seeing part of a company has what appears to be legitimate operations and therefore jump to the conclusion that the entire company and all their financial statements are legitimate.

Generally fraudulent companies have some real business operations whether it is Enron or Sino Forest. This is what allows them to fool auditors, investors, and other parties. In fact the market-making and proprietary trading units ran by Bernie Madoff were mostly legitimate operations while the fraud and pyramid scheme was being ran from the advisory unit. Often fraud isn't because a company has no real products/services or customers at all but rather their revenue, earnings, and financial statements are fraudulently overstated by a significant amount, leading to a massive overvaluation of the stock price.

Also one of the better examples of a company that attempted to conceal and grow their way into fraud through acquisitions is ZZZZ Best and Barry Minkow. As a brief description ZZZZ Best was a carpet-cleaning and restoration company that turned out to be fraudulent and nothing more than a ponzi scheme. However at its peak ZZZZ Best had over 1,000 employees and one point in 1987 they had a market cap of almost $300 million. When adjusting for inflation that would be over $600 million today.

Barry Minkow also had a plan to help conceal their fraud for ZZZZ Best through an acquisition. Back then he was very close to acquiring KeyServ, the authorized carpet cleaner for Sears, before it fell through the last minute and his company was exposed. Minkow at the time felt that the cash flow from KeyServ's Sears business would be enough to help him end the ponzi scheme he ran at ZZZZ Best.

The portfolio manager we spoke felt it is possible NQ Mobile may be trying to accomplish something similar with their acquisitions of FL Mobile and NationSky along with other possible future acquisitions. On the surface these acquisitions can help show they have some legitimate operations and at the same time the cash flow from these businesses can help NQ Mobile keep their scheme going longer.

NQ Mobile's "Venture Funds" Also Concerning

The portfolio manager also briefly mentioned that after speaking with some other investment managers he is mistrustful with the venture funds NQ Mobile's has apparently set up. He said they may be a possible way for the company to siphon off some cash. He wouldn't go into further details when asked but we did try to see what we can find out about NQ Mobile's venture funds.

Supposedly NQ Mobile has venture funds setup to invest small amounts into what they consider promising startups of mobile companies. It does appear not information about the venture funds or their investments has been made public by NQ Mobile in any of their SEC filings.

However we were able find some Chinese news online that mentions NQ Mobile's venture funds. One of them is an article dated September 4, 2013 which said NQ Mobile had set up a RMB 60,000,000 (around US $10 million) venture fund earlier in the year. One of their investments was into the company which produced the NQ Inmotion (knockoff Segway).

Another piece of news dated June 14, 2013 stated that NQ Mobile has set up an office in an area in Chengdu, China called Tianfu Software Park. It mentions that NQ Mobile has also set up a venture fund in Chengdu at the same time in order to support the development of local small and medium sized enterprises.

Also a few years earlier in October of 2010, NQ Mobile (still known as NetQin back then) established what translates to NetQin "Flying" Venture Fund. This fund is supposedly designed to provide financial as well technical support for individual entrepreneurs and businesses in the mobile and internet field to accelerate the development of the industry. Of interest is this was during their pre-IPO days and NQ Mobile was still relying on venture funding themselves when they set up their NetQin Flying Venture Fund.

Dr. Henry Lin's Humble Beginnings and NQ's Early Struggles Also Makes Fraud More Likely

Dr. Henry Lin, co-founder and co-CEO of NQ Mobile, often like to tell investors and the media how he came from humble beginnings and how NQ Mobile (known as NetQin back then) struggled to survive in the company's early years. Lin would say it was extremely difficult to obtain venture funding in the early days but he persevered, "never quit", and as a result NQ Mobile prospered and now has a bright future.

However the portfolio manager we spoke with explained that while it may be a nice story to tell, the humble beginnings of Dr. Lin combined with the early struggles for NQ Mobile actually makes fraud much more likely. He stated that it is possible NQ Mobile tried to go the legitimate route at the beginning but the company was going nowhere and was in danger of bankruptcy. As a result they might have decided to rely on tactics such as fraudulently billing users or even overstating revenue in order to have numbers which can draw interest and funding from venture capital firms in order to stay in business. Then the company may have continued down this path to obtain more funding until they appeared big enough to IPO in the US.

The portfolio manager also told us that based on his experience, Chinese companies that are ran by founders and executives who came from humble beginnings were much more likely to commit fraud. He explained that in the Chinese culture, wealthy families are usually extremely concerned with the reputation and honor of their family name. However individuals from poorer families are less likely to have such qualms in the face of greed. Therefore many that grew up poor find the prospect of conning tens or hundreds of millions of dollars from US investors without facing any legal repercussions in China way too tempting to pass up. Ruining their reputation in the process is not as big a concern to them since they aren't as worried about their family's reputation.

NQ Mobile Might Be Double Crossing HTC

When we spoke with the portfolio manager he asked us if we had heard of the HTC case where their lead designer and other employees stole trade secrets from the company and was planning on using them to open up a company of their own a few months ago. We answered we don't recall such a matter and he told us to look it up later.

For those unfamiliar with this story a brief summary is available here from ZDNet. Back around September of 2013 a group of HTC employees were arrested for allegedly stealing trade secrets from HTC and showing them to outside parties. The employees included Thomas Chien, HTC's vice president of product design, research and development director Wu Chien-Hung, and senior manager of design and innovation Justin Huang, along with other employees. They had apparently stolen "key interface technology" from HTC. It seems these employees were planning on setting up their own smartphone design company as they were also trying to poach talent away from HTC's design department.

There were also accusations these men were passing some specific trade secrets of HTC to the city government of Chengdu in China. A news report said that the Chengu government actually encouraged Chien to start his own company in China. If Chien was willing to bring the technology from HTC, then the Chengdu government was willing to help pay for many of the costs of setting up the new company. This includes the cost of opening a factory, production costs, and marketing costs.

In addition to stealing trade secrets, the former HTC employees were also accused of stealing money from HTC as well. It was said that they created fake invoices for commission fees for outsourcing work which actually didn't actually occur. Instead they secretly pocketed around US $334,000 of commission fees charged to HTC among themselves.

Back when we spoke with the portfolio manager he said that according to his media contacts, one of the companies Thomas Chien had actually met and shared the trade secrets with was NQ Mobile. Some of the trade secrets Chien shared were likely design plans for HTC's upcoming android interface, HT Sense 6.0. He said it is possible some of what NQ saw was copied into their upcoming NQ Live platform. The portfolio manager also said his media contacts told him that at the time, Chien apparently wanted to set up a joint venture with NQ Mobile for the smartphone design company he was planning on opening up in China and was willing to share HTC's trade secrets with NQ in the process.

The portfolio manager explained that a Chinese company trying to steal trade secrets from others and ripping off products and ideas isn't too surprising since it happens all the time. However this case is a little different though since HTC was actually an early investor and current partner of NQ Mobile. Back in November of 2010 HTC had invested $2.5 million in NQ (when they were still known as NetQin). According to NQ Mobile they have a preload partnership with HTC and are also providing app security service for the HTC App Store in China. The portfolio manager said if the meetings were true than NQ Mobile would have been double crossing HTC.

Initially after the portfolio manager told us this, we did find lots of news available on Thomas Chien and the theft of HTC's trade secrets. However none of them connected Chien and NQ Mobile. But later the story has broken out in the Chinese media. Here is one Chinese news article from China Times describing the case and mentioning Thomas Chien's meeting with NQ Mobile.

The articles says that on May 10 of 2013, Thomas Chien along with key members of the company he was trying to set up called "Jade technology" meet with Will Yiwei Jiang, vice president of strategy for NQ Mobile. This meeting took place in an upscale restaurant in Taipei, Taiwan and they ran up a tab of around 20,000 RMB (approximately USD $3,300). The location of the meeting and the price of their bill are known because Thomas Chien was too cheap to pay for it out of his own pocket and actually had HTC pay the tab saying it was entertainment expenses for a meeting with HTC clients.

Another article on China Times provides more detail on the matter and another meeting with NQ. This article said that Thomas Chien lied to HTC that he was trying to negotiate a partnership with Tsinghua University in Beijing and took upcoming graphic user interface designs to China. Instead on June 23, 2013 he was secretly meeting with NQ Mobile. The article said that NQ Mobile's VP of strategy Will Yiwei Jiang, co-founder and co-CEO Dr. Henry Lin Yu, and Vice President Li Yu (often called "Bruson" because his Chinese name is very similar to Henry Lin Yu's) attended this meeting. During the meeting NQ was apparently shown the stolen design plans as part of a presentation by Chien for a joint venture partnership.

No Response From NQ Mobile

We have emailed NQ Mobile's investor relations over a week ago with a list of the major issues mentioned here and asking whether or not they have any responses, comments, or explanations. So far we have not received a response.

Disclosure: I am short 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.

Additional disclosure: While I hold a short position on NQ at the time this article was submitted, I have been actively trading NQ both long and short the past month. I may continue to do so in the near future.