Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of NQ Mobile (NYSE: NQ) continued their volatile ways Monday, rising more than 17% after SEC filings revealed Morgan Stanley (MS 0.29%) has opened a 5.2% passive stake in the controversial Chinese mobile Internet services specialist.
So what: As it stands, remember the stock is currently trading more than 46% below its 52-week-high, which was set in October, just before noted short seller Muddy Waters accused the company of fraud. If Muddy Waters is ultimately proved wrong, it could undoubtedly be a great opportunity for long-term investors.
But this isn't without some level of precedent; Astute investors know several hedge funds already jumped in with at least 5% stakes shortly after Muddy Waters' initial report, most notably including ChinaRock Capital, Altimeter Capital, and Toro Investment Partners. This in mind, having a well-known name like Morgan Stanley on board undoubtedly serves as a solid vote of confidence that everything is on the up-and-up at NQ, especially given the significant uncertainty surrounding its future of late.
Now what: The move will likely drive some short-sellers out of their positions over the next few days. But considering the folks at Muddy Waters didn't back down even as NQ threatened lawsuits and formed an independent director committee to investigate the claims, I sincerely doubt it'll do anything to discourage Muddy Waters from sticking to its guns.
Also, remember Muddy Waters made things interesting earlier this month, when it offered to pay an impartial accounting firm to review the findings of NQ's independent director committee -- an offer I still think NQ would be wise to accept, by the way, as an effective means to show it has nothing to hide and definitively disprove Muddy Waters. That hasn't happened yet, which is why I remain unwilling to put my money at stake in NQ Mobile stock until the matter is fully resolved.
