NEW YORK (TheStreet) -- Mobile services provider NQ Mobile (NQ) took a steep dive after 1 p.m. EDT, on warnings from investment firm Muddy Waters Research. The Chinese-based, U.S.-listed stock had crashed 47.5% to $12.02 by 2:30 p.m. EDT.
Muddy Waters initiated a "strong sell" rating, calling the company a "massive fraud". Among the short-seller firm's claims, it said NQ had doctored figures pertaining to market share, number of customers and value of assets.
For instance, Muddy Waters questions the purported 55% real market share in China, which it says is more realistically around 1.5%, and claims of six million paying users in the country, more likely less than 250,000. Moreover, the firm alleges NQ's asset values are unsubstantiated and at least 72% of its 2012 China security revenue is "fictitious".
"We believe it is a 'zero'," the company wrote in its research report. "NQ's largest customer by far is really NQ ... NQ cannot monetize users that it does not have."
Before the dive, the stock had gained 278.8% year-to-date, reaching an all-time high of $25.90 a week earlier.
TheStreet Ratings team rates NQ Mobile Inc as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NQ Mobile Inc (NQ) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."