China's New Oriental rejects Muddy Waters accounts allegations

Thu Jul 19, 2012 1:02pm EDT

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(Reuters) - New Oriental Education & Technology Group Inc (EDU.N) rejected on Thursday claims by short seller Muddy Waters that the Chinese education firm's accounts were fraudulent in claiming full ownership of its centers.

New Oriental, whose stock slumped after the allegations came out and it revealed the U.S. Securities and Exchange Commission was investigating its finances, said it stood by its previous report that all 664 of its schools and learning centers as of May 31, 2012 were its own.

It said the Muddy Waters report contained numerous factual errors and misleading speculation.

Muddy Waters alleged that New Oriental had lied about its entire store network being company-owned and that the company had numerous franchisees. It said franchise fees were used to inflate its cash balances.

New Oriental, which offers English language tuition and test preparation courses in China, has grown from a small night-school to one of the largest providers of private educational services, said it was considering what action to take in response to the allegations.

Shares of New Oriental, which now has a market value of $1.47 billion, were up about 13 percent at $10.75 in early trades on Thursday on the New York Stock Exchange. They closed at $9.50 on Wednesday after crashing about 35 percent.

(Reporting by Ritika Rai in Bangalore; Editing by Rodney Joyce)

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