UPDATE 1-China MediaExpress denies fraud allegations; shares up

Mon Feb 7, 2011 11:17am EST

* Says short sellers caused 'voalatile swings' in stock

* To engage counsels for countermeasures

* Shares up 6 pct

Feb 7 (Reuters) - China MediaExpress Inc CCME.O on Monday termed the research reports calling the company's financial results into question as "misleading," and said its financial statements are backed by "well known auditors."

Shares of the China-based advertising company were up 6 percent at $14.68 in morning trading on Nasdaq.

The stock lost nearly 50 percent of its value in the first four days of last week when two separate reports by online brokerages raised concerns on the credibility of the company's operations and its reported 2009 revenue.

Chief Executive Zheng Cheng said the reports are the handiwork of short sellers.

"We have every reason to believe that each of these 'researchers' is actually a short seller, and each stands to make money when they succeed in driving down the price of our stock," he said in a statement.

Online brokerage Muddy Waters Research called into question the company's reported revenue and scale of operations close on the heels of another online broker Citron Research's similar allegations. [ID:nN03116108]

The company also said its board has authorized engagement of "outside counsel and other consultants" for advise on countermeasures against the two reports. (Reporting by Himank Sharma in Bangalore; Editing by Maju Samuel)

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Comments (3)
JoeNatural wrote:
Well geez, anyone with just half of a brain expected that short-sellers would plaster the internet with “hit pieces,” as they were deep in the hole since $8.00 back in September. Funny how no one has written an article about how Muddy Waters fabricated the entire report. The money was just too tempting for them, as short-sellers paid huge bucks for these “hit pieces,” thus they could cover for far less of a loss than the $100 million they were staring at. These “hit pieces” were timed perfectly, right when longs were heavily margined, right when shorts were under Reg Sho and right when the Chinese New Year began. LOL. Americans call China a fraud, yet the real fraud is comprised of Americans.

Feb 07, 2011 11:32am EST  --  Report as abuse
shouldbfishing wrote:
Dear Reuters,

You have made a serious error in your reporting.

You refer to “two separate reports by online brokerages”.

Firstly, they are not reports.

Secondly, they were not issued by online brokerages.

They are both BLOGS. That’s all.

They are not ‘online brokerages’. They are not even real research companies.

Please correct your article IMMEDIATELY!

If you really want to do some reporting, please investigate and report the felony background of the person who wrote the citron BLOG. Very interesting!

Feb 07, 2011 12:09pm EST  --  Report as abuse
1ert wrote:
As usual nothing much to report on such fraud in the Western press. To them its just an isolated individual case compared to the degree of fraud happening in China. If there is just a minor fraud in China, it will be a big thing in the press – sensationalized, exploited and exaggerated to the maximum. In actual fact fraud is so prevalent in the American corporate sector, its the press which “cover” them up.

Feb 07, 2011 12:44pm EST  --  Report as abuse
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