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NQ Mobile sues Muddy Waters

Updated: 2013-11-05 14:17

Chinese tech companies are fighting back. NQ Mobile has filed charges against Muddy Waters Research in China, following allegations by Muddy Waters that its 2012 earnings are not accurate. The CEO says he also does not rule out the possibility of pressing charges against the short seller in the US.

A bold attack from Muddy Waters Research on Oct 25. The short-seller claimed that almost 72 percent of NQ Mobile's 2012 earnings were fake. According to Muddy Waters' 81-page report, the tech company accounts for only 1.5 percent of the Chinese market, and not 55 percent. Also, the report pointed out that NQ Mobile has only fewer than 250,000 users, not the proclaimed 6 million. On the day the report came out, NQ Mobile's share price in NASDAQ plunged as much as 47 percent.

Lin Yu, CEO of NQ Mobile, says, "This is not the first time Chinese companies were under attack by Muddy Waters. Well-performing companies like New Oriental and Focus Media have also been targets. Such attacks often lead to panic sells."

Lin Yu also says that NQ Mobile has begun its fight-back. On Oct 29, the company issued its own 97-page report, accusing Muddy Waters Research of twisting the facts. In response to the accusations against its financial situation, the report included a list of bank data, which shows that the firms has around $280 million worth of fixed deposit. It also listed several cell phone companies it has business cooperation with. As he says, NQ Mobile's retaliation goes beyond the report.

"We have filed charges against Muddy Waters and the author of their report in China, and we don't rule out the possibility to use similar measures in US."

After a flurry of responses by NQ Mobile, the company's share price rebounded. As of last Friday, its share prices closed at $12.78 in New York, marking a nearly 60 percent rebound from its lowest price after the release of the Muddy Waters report.

NQ Mobile sues Muddy Waters