At just after half past five yesterday afternoon, the researchers at Muddy Waters emailed their verdict *on another of those Chinese companies you’ve never heard of. This one is called Focus Media Holding Ltd, and describes itself as “China’s largest out-of-home lifestyle interactive targeted digital media group” and that car-crash of adjectives alone was probably enough to arouse the Muddy analysts’ interest.

Muddy Waters’ email concluded that NASDAQ-listed FMCN shares were a screaming sell. Within minutes the price had halved. There was some recovery later, but the stock ended 40% lower on the day. Only last Thursday FMCN reported revenues and earnings far ahead of the company’s previous guidance.They are probably too stunned in Shanghai, FMCN’s HQ, to respond quickly, but I have to say that the analysis looks pretty damn’ devastating to me. The Muddies call the company The Olympus of China, pointing to a $1.1 billion writedown since 2005 of acquisitions costing $1.6 billion. And yes, the F-word is there too. If the analysis is even half right, this stock looks expensive at any price.

Nov 22 update: visitors to the site now get this message (if they get one at all):

MW regrets that our site has been hacked. We will bring it up as soon as possible.  

FMCN is still a Strong Sell. 

Happy Thanksgiving,  

MW

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