Traders are boosting bullish bets on NQ Mobile Inc. (NQ) to a 14-month high in the options market on speculation the company that’s been targeted by short seller Carson Block will meet a November deadline to file its 2013 annual report after months of delays.
The number of calls to buy shares of the Chinese mobile-security service provider has climbed to 356,000 on Oct. 8 from 150,000 at the end of 2013. The trading has pushed the number of bullish contracts to 3.9 for every bearish put outstanding, the highest ratio since July 2013. The stock has soared 74 percent through yesterday from a three-year low in July. It’s still down 69 percent since Block accused the Beijing-based company of overstating revenue a year ago.
While NQ Mobile said in June that an internal probe didn’t find any evidence of fraud, the company has yet to submit its audited 2013 report, or 20-F, after missing two filing dates in April and May. Missing the next deadline, set for Nov. 15, would be more dire: It could trigger the company’s delisting from the New York Stock Exchange, according to the bourse’s regulations.
“The options trading shows someone has a lot of conviction in the stock,” Fred Ruffy, a senior options strategist at Trade Alert LLC in Chicago, said via phone yesterday. “The big catalyst for a move higher would be if NQ can file their 20-F report and move on.”
New Auditor
American depositary receipts of NQ Mobile fell 0.8 percent to $7.14 at 10:36 a.m. in New York as a Bloomberg index of the most-traded Chinese companies in the U.S. lost 2.2 percent.
NQ Mobile, which has denied the accusations made by Block’s research firm Muddy Waters LLC, hired Marcum Bernstein & Pinchuk LLP in July as its new auditor to replace PricewaterhouseCoopers Zhong Tian LLP. PricewaterhouseCoopers’ request for information that isn’t in the company’s possession may hamper its obligation to file its 2013 annual report, NQ Mobile said at the time. The company reiterated then that previously disclosed financial results are accurate.
Should NQ Mobile file its 20-F report, it will be with an auditor that specializes in issuing unqualified opinions for questionable Chinese companies, Block said yesterday via e-mail.
“NQ Mobile was, and still is, a near total fraud,” the short seller said. “Since our report, NQ management has been caught in numerous material lies, the company has admitted to widespread evidence tampering, its CFO and audit committee chairs have resigned, and its Big Four auditor refused to issue a clean audit opinion.”
NYSE Deadline
Drew Bernstein, co-managing partner at Marcum Bernstein & Pinchuk, said it would be “inappropriate” for his firm to comment on an independent audit that is still in progress, according to an e-mailed response to questions about the filing date and Block’s statement.
Matt Mathison, vice president of capital markets at NQ Mobile, said the firm is working with Marcum Bernstein & Pinchuk to file its 2013 report as soon as possible.
“MBP is working to complete their work and we continue to expect to file the Form 20-F for 2013 within the time frame granted by the NYSE,” he wrote in an Oct. 8 e-mail.
NQ Mobile submitted a late-filing notice to the Securities and Exchange Commission on April 30, and in a May 15 statement said it still needed more time to produce its annual report. The company needs to present the document in the time frame allowed by New York Stock Exchange regulations if it plans to keep its stock listed on the bourse, according to rules confirmed by exchange spokeswoman Sara Rich yesterday. She declined to comment on NQ Mobile’s filing status.