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  "docSlug": "7f8b05d541c7",
  "documentTitle": "Focus Media Holding Ltd. (FMCN)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2011-11-21 00:00:00",
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  "pageNumber": 33,
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  "notes": "The slide uses forensic accounting logic to expose potential overpayment or asset misvaluation.",
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      "text": "FMCN paid at least 7.4x as much as the implied value of the previously negotiated transaction.",
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      "kind": "image",
      "text": "Photograph of the Captain Six boat on a river with a city skyline in the background.",
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      "text": "acquisition overpayment: 7.4x",
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      "kind": "paragraph",
      "text": "FMCN bought the boat, the Captain Six, separately for at least $12.4 million99, which we estimate is 3.2x ($8.5 million) more than it should have cost. Below is a picture of the Captain Six:",
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      "text": "We estimate that the total cost of the boat and its renovations should have been no more than $3.9 million, versus the minimum of $12.4 million that FMCN paid for the boat and equipment. FMCN's boat appears to be a standard 40-meter steel-hulled, diesel propelled freighter commonly utilized for intra-harbor transfers and coastal shipping. Boats of this type are easy to acquire, have limited competitive advantage, and trade frequently in the secondary market. Based on quotes provided by Meridian Marine Brokerage, we estimate the acquisition of the boat itself to cost at most $1.0 million.",
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      "kind": "paragraph",
      "text": "were purchased separate from ZHPY, and $3.2 million in intangible assets (ZHPY's license and patent). We therefore assume that the balance of $24.2 million is for ZHPY, including goodwill. The combination of the intangible assets and goodwill yields a $27.4 million purchase price for ZHPY. Note that FMCN has not specifically stated that it wrote down the values to zero. If FMCN maintains a residual value, then the payment and overpayment amounts would be correspondingly higher.",
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      "kind": "paragraph",
      "text": "documents show that only three months earlier, the prior shareholders of ZHPY had executed a purchase and sale agreement to sell 90% of ZHPY for $3.3 million. (The would-be purchaser failed to pay the deposit on time, but subsequently sued for specific performance of the purchase and sale agreement.) The implied valuation of ZHPY was therefore $3.7 million. FMCN paid at least 7.4x as much as the implied value of the previously negotiated transaction.",
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      "kind": "source-note",
      "text": "99 Q1 2009 6-K, June 19, 2009",
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