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Strategies & Market Trends : Greater China Stocks
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To: pcyhuang who wrote (7410)2/7/2011 8:17:00 AM
From: Julius Wong   of 8334
 
Muddy Firm Sinks China MediaExpress on New Years Day
Feb. 4 2011
Posted by Ken Kam

China MediaExpress (CCME) lost 33% yesterday after a negative report was published by Muddy Waters Research. Like the previous reports, this one raises questions that only someone inside the firm can answer. The shorts presumably want more disclosure but note that little is disclosed on Muddy Waters web site about the company, its principal Carson Block or its stock positions.

By publishing a negative report on a Chinese company on Chinese New Years day, Muddy Waters ensured that no one from the company would be able to respond for at least 24 hours. In addition, because CCME did not use an investment bank to go public, there is no Wall Street analyst that shareholders can count on to tell the company’s side of the story.

The basic questions Muddy Waters raises will be answered when Deloitte (a top tier accounting firm) issues its audit results. Questions such as whether 2009 revenue was $95.9 million as reported or $17 million as Muddy Waters contends, have already been answered by the auditors in last year’s audit. Deloitte has far better methods to verify CCME’s information than Muddy Waters does.

Although the 2010 audit is not yet finished, perhaps CCME and Deloitte could make public some of the details from the audit plan regarding the methods used verify revenues and cash balances in 2009 and 2010. These are some of the easier things for an auditor to verify but they are extremely difficult for anyone outside the company to assess.

blogs.forbes.com
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