- The special committee found evidence of missing data on many devices.
- Management was unable to provide a credible explanation for the missing data.
- In all the press releases since, NQ has never mentioned what data was missing.
Ever since the special committee report came out and found no fraud against NQ Mobile (NYSE:NQ), but did find evidence of missing data on many devices, the stock price has lost almost 50% of its value. The report also stated that management was unable to provide a credible explanation for the missing data. In all its subsequent press releases since then, NQ has never mentioned or tried to explain what data was missing on many devices. Until they finally decide to "get it over with" and explain what it was that they were destroying or hiding, then who would want to buy or own the stock?
I think the committee using the word "many" when referring to the devices is highly significant here. Not "one or two" or even "a few" devices had missing data, but "many" devices had missing data. Isn't it practically a fact that this means they ran around covering their butt by deleting all incriminating (and probably fraudulent) information? How could one logically assume that the information they deleted on "many" devices is not that relevant and won't really matter in the long run? It is very clear that the auditor is asking NQ to produce more information, and NQ even stated that PwC was expanding the scope of the audit.
This is where it gets even more interesting. NQ stated that they are "considering PwC's request". What is there to consider? Your auditor wants additional information and your answer is to tell them something to the effect of: "We will think about it and get back to you later." That is the best and most credible answer they can give the auditor at this point? Who could possibly want to own or buy the stock when they can't even provide a credible explanation of what information is missing on many devices?
Not once, in all the press releases since the special probe results came out, has NQ even mentioned the missing information. Now, some of the accusations about NQ may be outrageous and can certainly be "ignored and excused" by die-hard longs. But if NQ can't even answer a simple question about why information is missing on many devices, then something is obviously more than "just fishy". It must be some terribly fraudulent information that could destroy the integrity of the company for them to not even attempt to explain it.
In summary, PwC is a professional auditor -- they don't have the freedom of just reporting that information is missing like the special probe reported, they need to verify all information. Longs keep saying that "once the audit comes back clean, this thing will triple." That would probably be true if the auditor decides to "just not worry about" missing information (highly unlikely).
But the real statement should be more like: "Once NQ decides to provide the information that is missing, then this thing will quit draining off 5% a day." The stock is never going to go up and a professional auditor is never going to give the anticipated "clean" audit if there is information missing. And an auditor is certainly not going to give a clean audit if the company does not even have a credible explanation for the missing information on many devices.
I was long and tried to excuse things as long as I could, but now if I owned this stock and tried to excuse missing information and no explanation for why it is missing, I'd think I was doing myself and my money a huge disservice. Sell this stock and don't be ridiculous, at least until they try to give some type of credible explanation for the missing information that the investigation team observed.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.