What's Behind NQ Mobile's (NQ) 25% Gain?

NEW YORK (TheStreet) -- NQ Mobile (NQ) exploded after dual news it had sued investment firm Muddy Waters and was taking action to prove the existence of its cash assets. Shares had gained 25.1% to $11.01 by the end of Tuesday trading. The company has yet to recover all the losses sustained since it plunged 55% on Thursday.

The mobile services provider filed a lawsuit in Beijing against "false allegations" pedaled by short-seller firm Muddy Waters last week. The latter initiated a "strong sell" rating against the company, claiming it was a "massive fraud" with doctored financials.

The Beijing-based tech company also announced it has completed the transferal $16.4 million in term deposits to a recently-opened Standard Chartered Bank account to address concerns over the existence of cash assets.

"Our actions speak louder than anyone's words and all other arguments and falsehoods fall by the wayside as our cash position is completely and independently verified," said co-CEO Dr. Henry Lin in a statement.

Meanwhile, Muddy Waters has doubled-down on its claims.  It released a new report listing the company's "Top Ten Lies Since Friday", which includes claims private company Yidatong acts as a shell corporation for NQ and that information on its top customers UMPay and Info2Cell is false.

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."

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