Muddy Waters Initiating Coverage on FMCN – Strong Sell
Muddy Waters rates Focus Media Holding Ltd. (NASDAQ: FMCN) shares a Strong Sell because of significant overstatement of the number of screens in its LCD network and its Olympus-style acquisition overpayments. The $1.1 billion in write-downs from its acquisitions exceed one-third of FMCN’s enterprise value, making FMCN’s acquisitive behavior more destructive than Olympus’s to shareholder value. FMCN insiders have sold at least $1.7 billion worth of stock (two-thirds of FMCN’s enterprise value) since FMCN’s IPO. At the same time, the insiders and their business associates further enrich themselves by trading in FMCN assets, while costing FMCN shareholders substantial sums of money.
- FMCN has been fraudulently overstating the number of screens in its LCD network by approximately 50%. This is similar to China MediaExpress Holdings, Inc. (OTC: CCME), which we reported is a fraud on February 3, 2011. We therefore question whether FMCN’s core LCD business is viable.
- Like Olympus, FMCN is significantly and deliberately overpaying for acquisitions, writing down $1.1 billion out of $1.6 billion in acquisitions since 2005. These write-downs are equivalent to one-third of FMCN’s present enterprise value.
- Our research shows that FMCN has claimed to acquire, write down, and dispose of companies that it never actually purchased. Investors should be concerned about to where cash actually moved in these transactions, and about the integrity of reported results.
- FMCN has written at least 21 acquisitions down to zero and then given them away for no consideration. We show that many of these write-downs are not justified. There are several possible nefarious reasons FMCN gives acquisitions away, including doing so may put FMCN’s problems beyond the reach of auditors.
- Insiders have used FMCN as their counterparty in trading in and out of FMCN subsidiary Allyes, with several individuals earning a total of at least $70.1 million, while shareholders lost $159.6 million.
- Sales of FMCN shares by insiders have netted them at least $1.7 billion since FMCN went public in 2005.
To download the full report, check the box to agree with the Terms of Service and then click the “Download Report” button.
Use of Muddy Waters LLC’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein. You should assume that as of the publication date of any report or letter, Muddy Waters, LLC (possibly along with or through our members, partners, affiliates, employees, and/or consultants) along with our clients and/or investors has a short position in the stock (and/or options of the stock) covered herein, and therefore stands to realize significant gains in the event that the price of stock declines. Following publication of any report or letter, we intend to continue transacting in the securities covered therein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. This is not an offer to sell or a solicitation of an offer to buy any security, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction. Muddy Waters, LLC is not registered as an investment advisor. To the best of our ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and who are not insiders or connected persons of the stock covered herein or who may otherwise owe any fiduciary duty or duty of confidentiality to the issuer. However, such information is presented “as is,” without warranty of any kind – whether express or implied. Muddy Waters, LLC makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and Muddy Waters, LLC does not undertake to update or supplement this report or any of the information contained herein.
You agree that any dispute arising from your use of this website or viewing the material hereon shall be governed by the laws of the State of California, without regard to any conflict of law provisions. You knowingly and independently agree to submit to the personal and exclusive jurisdiction of the superior courts located within the State of California and waive your right to any other jurisdiction or applicable law, given that Muddy Waters, LLC has offices in California. The failure of Muddy Waters, LLC to exercise or enforce any right or provision of these Terms of Service shall not constitute a waiver of this right or provision. If any provision of these Terms of Service is found by a court of competent jurisdiction to be invalid, the parties nevertheless agree that the court should endeavor to give effect to the parties’ intentions as reflected in the provision and rule that the other provisions of these Terms of Service remain in full force and effect, in particular as to this governing law and jurisdiction provision. You agree that regardless of any statute or law to the contrary, any claim or cause of action arising out of or related to use of this website or the material herein must be filed within one (1) year after such claim or cause of action arose or be forever barred.
Before viewing the contents of this report, you agree that any dispute arising from your use of this report or viewing the material herein shall be governed by the laws of the State of California, without regard to any conflict of law provisions. You knowingly and independently agree to submit to the personal and exclusive jurisdiction of the superior courts located within the State of California and waive your right to any other jurisdiction or applicable law, given that Muddy Waters, LLC has offices in California. The failure of Muddy Waters, LLC to exercise or enforce any right or provision of this disclaimer shall not constitute a waiver of this right or provision. You agree that regardless of any statute or law to the contrary, any claim or cause of action arising out of or related to use of this report or the material herein must be filed within one (1) year after such claim or cause of action arose or be forever barred.
Terms of Use
The reports on this website have been prepared by Muddy Waters, LLC (d/b/a Muddy Waters Research, hereinafter “Muddy Waters Research”). We refer to Muddy Waters Research, collectively with its affiliates and related persons as “Muddy Waters” and each individually as a “Muddy Waters Entity”. All reports are for informational purposes only. Under no circumstances should any of these reports or any information herein be construed as investment advice, an offer to sell, or the solicitation of an offer to buy, any security or financial instrument.
Muddy Waters Research is an online research publication that produces due diligence-based reports on publicly traded securities. The reports are the property of Muddy Waters Research. This website is owned by Muddy Waters Research. The opinions, information, and reports set forth herein are solely attributable to Muddy Waters Research and are not attributable to any member, manager, officer, director, employee, member, client, client of an affiliate, investor, consultant, affiliate or agent thereof (collectively, such persons, the “Muddy Waters Related Persons”).
As of the publication time and date of each report, Muddy Waters Related Persons are SHORT the securities of the subject issuer (each, a “Covered Issuer”), unless otherwise stated in the report. Such person will likely realize significant gains if the prices of the Covered Issuer’s securities decline. Muddy Waters Related Persons intend to continue transacting in the securities of Covered Issuer for an indefinite period after the report’s publication date, and such Muddy Waters Related Person may be long, short, or neutral at any time thereafter regardless of their initial position and views as stated as of the time of first publication. No Muddy Waters Related Person has a duty to update you on our position in a Covered Issuer or whether we have a position in a Covered Issuer.
Each report on this website is opinion journalism. Muddy Waters Research is providing its journalistic opinions about issues of concern to the general public based on facts that are fully disclosed to the readers. To the best of our knowledge, all information contained herein is accurate and reliable and has been obtained from publicly available sources that we believe to be accurate and reliable. The information presented herein is “as is,” without warranty of any kind, whether express or implied. All expressions of opinion are subject to change without notice, and Muddy Waters Research is under any duty to update or supplement this presentation or any information or opinion herein.
Muddy Waters Research is an affiliate of and under common control with Muddy Waters Capital LLC, which is an investment adviser registered with the U.S. Securities and Exchange Commission. Muddy Waters Capital LLC and its relying advisers (collectively, Muddy Waters Capital”) does not render investment advice to anyone unless it has an investment adviser-client relationship with that person evidenced in writing. You understand and agree that Muddy Waters Capital does not have any investment advisory relationship with you or does not owe fiduciary duties to you. Giving investment advice requires knowledge of your financial situation, investment objectives, and risk tolerance, and Muddy Waters Capital has no such knowledge about you.
By downloading from, or viewing material on this website, you agree to the following Terms of Use. You agree that your use of the research on this website is at your own risk. You agree to hold harmless all Muddy Waters Related Persons for any direct or indirect losses (including trading losses) attributable to any information on this website or in a research report. You further agree to do your own research and due diligence before making any investment decision with respect to securities of the Covered Issuer or any other financial instruments that reference the Covered Issuer or any securities issued by the Covered Issuer. You represent that you have sufficient investment sophistication to critically assess the information, analysis and opinion on this website. You further agree that you will not communicate the contents of reports and other materials on this site to any other person unless that person has agreed to be bound by these Terms of Use. If you access this website, download or receive the contents of reports or other materials on this website on your own behalf, you agree to and shall be bound by these Terms of Use. If you access this website, download or receive the contents of reports or other materials on this website as an agent for any other person, you are binding your principal to these same Terms of Use.
If you are in the United Kingdom, you confirm that you are accessing research and materials as or on behalf of: (a) an investment professional falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “FPO”); or (b) high net worth entity falling within Article 49 of the FPO (each a “Permitted Recipient”). In relation to the United Kingdom, the research and materials on this website are being issued only to, and are directed only at, persons who are Permitted Recipients and, without prejudice to any other restrictions or warnings set out in these Terms of Use, persons who are not Permitted Recipients must not act or rely on the information contained in any of the research or materials on this website.
You agree that no Muddy Waters Related Person shall be liable for any claims, losses, costs, or damages of any kind, including direct, indirect, punitive, exemplary, incidental, special or consequential damages, arising out of or in any way connected with this presentation. This limitation of liability applies regardless of any negligence or gross negligence of any Muddy Waters Related Persons. You accept all risks in relying on the information and opinions in this presentation.
You agree that the information on this website is copyrighted, and you therefore agree not to distribute this information (whether the downloaded file, copies / images / reproductions, or the link to these files) in any manner other than by providing the following link: https://muddywatersresearch.com/research/. If you have obtained research published by Muddy Waters Research in any manner other than by download from that link, you may not read such research without going to that link and agreeing to the Terms of Use. You agree that any dispute between you and Muddy Waters Research and its affiliates arising from or related to this presentation shall be governed by the laws of the State of Texas, without regard to any conflict of law provisions. You knowingly and independently agree to submit to the personal and exclusive jurisdiction of the state and federal courts located in Austin, Texas and waive your right to any other jurisdiction or applicable law, given that Muddy Waters Research and its affiliates are based in Austin, Texas. The failure of Muddy Waters Research to exercise or enforce any right or provision herein shall not constitute a waiver of such right or provision. You agree that each Muddy Waters Related Person is a third-party beneficiary to these Terms of Use. If any provision of these Terms of Use is found by a court of competent jurisdiction to be invalid, the parties nevertheless agree that the court should endeavor to give effect to the parties’ intentions as reflected in the other provisions set forth herein, in particular as to this governing law and jurisdiction provision. You agree that regardless of any statute or law to the contrary, any claim or cause of action arising out of or related to this presentation must be filed within one (1) year after the occurrence of the alleged harm that gave rise to such claim or cause of action, or such claim or cause of action be forever barred.