Shares of NQ Mobile plummeted in their biggest single daily decline ever on Thursday, after Muddy Waters Research Group started coverage of the company with a "strong sell'' rating, calling it a "massive fraud.''
The mobile Internet services company, which has a market cap of about $1.17 billion, did not immediately return requests for a comment.
The stock fell 40 percent to $13.02, its biggest single daily decline since it began trading in May 2011. Trading was repeatedly halted because of volatility, but volume was several time NQ's 50-day average volume of about 383,000 shares.
Muddy Waters shorts the stocks it reports on, making money if the stock price declines. The research group called the stock a "zero" and accused the company of falsifying financial information.
"Our research estimates that NQ's real market share in China is only about 1.5 percent, versus the approximately 55 percent it reports,'' Muddy Waters wrote in a research note. "We estimate that its China paying user base is less than 250,000, versus the six million NQ claims.''