Focus Media shares plunge 39% on Muddy Waters attack

Shares of Focus Media (FMCN.NASDAQ) plunged 39% Monday and more than US$1.36 billion of Focus Media’s market value was wiped out after short-seller Carson Block questioned the accounting practices of the Shanghai-based advertising network, Bloomberg reported. At least 10 research firms had “buy” ratings on Focus Media and several analysts had raised their target price after the company’s third-quarter profits beat consensus estimates by 12%. Muddy Waters, Block’s research firm which was also responsible for a devastating report on the Toronto-listed timber company Sino-Forest (TRE.TSE), said Focus Media had overstated the number of TV screens in its ad network and overpaid for takeovers to mask losses. “The problems we have uncovered are likely the tip of the iceberg,” said Block.