All Eyes on Focus Media (FMCN) Ahead of Muddy Waters Interview
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Traders will have their eyes on Focus Media Holding Ltd. (Nasdaq: FMCN) Tuesday ahead of a Street Signs interview with Muddy Water's Carson Block, a harsh critic of the stock. Street Signs airs live on CNBC from 2-3pm ET.
Shares of Focus Media are down 33 percent since Muddy Water's first came out negative on the stock on November 17th.
Muddy Waters rated the shares a "Strong Sell," citing the significant overstatement of the number of screens in its LCD network and its "Olympus-style" acquisition overpayments. Olympus is the Japanese camera-maker embroiled in a massive accounting scandal.
Focus Media's $1.1 billion in write-downs from its acquisitions tops one-third of its enterprise value, Muddy notes. This makes the company's acquisitive behavior "more destructive than Olympus’s to shareholder value," the group contends. Muddy Waters also highlighted the $1.7 billion in insider stock sales. Muddy said the company "has been fraudulently overstating the number of screens in its LCD network by approximately 50%." The full Muddy Waters research report can be found here.
The company, for its part, has denied the allegations "entirely." The LCD screen allegations are unfounded and misunderstand the company's business, Focus Media said. "We believe that those responsible for compiling the Report based their calculation entirely on the number of basic LCD screens, and ignored the digital screens and LCD picture frame devices, erroneously believing the latter two to be part of the Company's picture frame network," the company said.
Focus Media also reaffirmed its share repurchase program and announced Chairman Jason Jiang purchased US$11 million in Focus Media ADSs in a block trade.
Illustrating how tense the situation has become, Muddy Waters website was hacked after its initial report. The website appears up this morning, although it is acting slow.
On Monday, Sina (Nasdaq: SINA) got tied in with the Muddy Waters/Focus Media feud following reports which highlighted Sina's CEO is on the board at Focus Media. In light of the speculation and market reaction, Muddy Waters made a rare statement and said the firm has no report forthcoming on Sina.
There is no doubt Mr. Block will press his case on his Focus Media short when he appears on CNBC later Tuesday, with new allegations possible. The company is likely prepared with a counter-attack.
Shares of Focus Media are down 33 percent since Muddy Water's first came out negative on the stock on November 17th.
Muddy Waters rated the shares a "Strong Sell," citing the significant overstatement of the number of screens in its LCD network and its "Olympus-style" acquisition overpayments. Olympus is the Japanese camera-maker embroiled in a massive accounting scandal.
Focus Media's $1.1 billion in write-downs from its acquisitions tops one-third of its enterprise value, Muddy notes. This makes the company's acquisitive behavior "more destructive than Olympus’s to shareholder value," the group contends. Muddy Waters also highlighted the $1.7 billion in insider stock sales. Muddy said the company "has been fraudulently overstating the number of screens in its LCD network by approximately 50%." The full Muddy Waters research report can be found here.
The company, for its part, has denied the allegations "entirely." The LCD screen allegations are unfounded and misunderstand the company's business, Focus Media said. "We believe that those responsible for compiling the Report based their calculation entirely on the number of basic LCD screens, and ignored the digital screens and LCD picture frame devices, erroneously believing the latter two to be part of the Company's picture frame network," the company said.
Focus Media also reaffirmed its share repurchase program and announced Chairman Jason Jiang purchased US$11 million in Focus Media ADSs in a block trade.
Illustrating how tense the situation has become, Muddy Waters website was hacked after its initial report. The website appears up this morning, although it is acting slow.
On Monday, Sina (Nasdaq: SINA) got tied in with the Muddy Waters/Focus Media feud following reports which highlighted Sina's CEO is on the board at Focus Media. In light of the speculation and market reaction, Muddy Waters made a rare statement and said the firm has no report forthcoming on Sina.
There is no doubt Mr. Block will press his case on his Focus Media short when he appears on CNBC later Tuesday, with new allegations possible. The company is likely prepared with a counter-attack.
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