Bloomberg News

Focus Media Falls Most in Seven Weeks on Muddy Waters Report

January 08, 2012

(Updates with Focus Media response in fourth paragraph.)

Jan. 6 (Bloomberg) -- Focus Media Holding Ltd., a digital advertising company in China, sank the most in seven weeks in New York trading after short-selling firm Muddy Waters LLC questioned an acquisition.

The company’s American depositary receipts dropped 5.4 percent to $18.63 as trading closed in New York, the biggest decline since Nov. 21.

The acquisition by Focus of a ginseng plantation at the Russian and North Korean border was “bizarre,” Muddy Waters said in a report on its website today. One of the selling shareholders included at least one employee of Focus, the report said, adding the company has “deliberately” overpaid for “numerous acquisitions,” an assertion it first made in November.

Focus Media, following Muddy Waters’s report, issued a statement to “entirely” deny the allegations. It said the “insignificant” transaction of a regional distributor in northeast China was “to expand the company’s display network.”

Focus Media, based in Shanghai, added it will disclose more information about the transaction next week, according to its statement.

Muddy Waters said in a November report that Focus was overstating the size of its advertising network and overpaid in its purchases. Focus reported on Dec. 22 a second survey result by market research company Synovate which showed that the number of LCD screens and poster frames Focus claimed to have by Nov. 28 was more than 99.95 percent accurate.

The ADRs of Focus Media have slumped 27 percent since Muddy Waters’s first report Nov. 21.

--Editors: Glenn J. Kalinoski, Marie-France Han

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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