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What: Shares of NQ Mobile (NYSE:NQ) plunged more than 15% during intraday trading Friday, extending yesterday's harrowing 54% drop, after the Chinese mobile Internet services company was accused of fraud by noted short-seller Muddy Waters.
So what: Specifically, Muddy Waters published a scathing 80-page report on Thursday asserting that, among other claims, "at least 72% of NQ's purported 2012 China security revenue is fictitious," and that "NQ's cash balances are highly likely not to be real."
NQ Mobile fired back on Friday, threatening legal action, and saying it believes the allegations are "false and inaccurate and contain numerous errors of facts, misleading speculations and malicious interpretations of events." Nonetheless, NQ also stated it has formed a special committee of four independent directors to investigate the claims.
In addition, NQ issued a follow-up press release Friday containing what it described as a "table of major term deposits in cash as of today," with the total amounting to roughly $124 million.
Now what: Considering today's drop, NQ's quick response obviously didn't seem to appease skittish investors, who remain leery of the stigma which arose from previous cases of alleged fraud by Chinese companies. Of course, if NQ mobile can successfully defend itself, steel-nerved investors could certainly stand to reap significant rewards on any potential rebound. However, I think this is one risky, speculative bet I wouldn't be willing to take.
Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.