Updated to include NQ Mobile's response to Muddy Waters' allegations.
NEW YORK (TheStreet) -- NQ Mobile (NQ) resumed trading after management held a conference call to dispute what it calls "false and inaccurate" allegations. Shares of the mobile services provider took a steep dive Thursday on warnings from the short-seller investment firm Muddy Waters Research.
The Chinese-based, U.S.-listed stock crashed 47% to $12.09 on Thursday before trading of shares were halted. Trading resumed just before 2 p.m. EDT and shares continued to fall 12.1% by close and an additional 2.6% in post-market action.
NQ Mobile called together a conference on Friday morning in an effort to make its financial position transparent. The company said it had commissioned an independent special committee to conduct a review of Muddy Waters' allegations. In the meantime, management issued details of the major term deposits in cash it currently has on hand.
A day earlier, Muddy Waters initiated a "strong sell" rating, calling the company a "massive fraud". Among the short-seller firm's claims, it alleged NQ had doctored figures pertaining to market share, number of customers and value of assets.
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, which it says is 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."