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  "documentTitle": "Focus Media Holding Ltd. (FMCN)",
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  "authorName": "Muddy Waters",
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      "text": "We maintain our Strong Sell rating on FMCN mainly because our concerns regarding the viability of FMCN's core LCD commercial location network remain.",
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      "text": "FMCN's filings clearly state the three menu items through which it sells LCD commercial location network advertising. The three menu items are channels A1, A2, and the Travel channel. Per the media kits and confirmatory conversations with FMCN sales, channel A1 consists of approximately 70,000 displays. A2 consists of approximately 40,000 displays. Travel consists of approximately 3,000 displays. See Appendix A for an excerpt of a conversation with FMCN sales confirming these numbers. The total number of displays in these three channels is fewer than 120,000.",
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      "text": "The digital frames to which FMCN's response counts in the LCD commercial display network are actually separate and distinct products. FMCN's filings state that it counts digital poster",
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      "text": "We believe FMCN already counted those digital frames in the 335,822 digital and traditional poster frames it claimed to have as of December 31, 2010 because:",
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      "text": "We maintain our Strong Sell rating on FMCN mainly because our concerns regarding the viability of FMCN's core LCD commercial location network remain. This issue, combined with FMCN's additional misrepresentations about the size of the network, FMCN's opaque business model (on both the revenue and cost sides), and insiders' penchant for self-dealing, render FMCN shares un-investable.",
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      "text": "We believe that FMCN's impending “independent” verification of the number of LCD screens in its network is likely to be compromised. There is precedent for this statement – FMCN's audit committee previously undertook a flawed investigation into possible improprieties. As we discussed in our initial report, FMCN's board's is comprised of individuals who are largely entangled with management and whose compensation misaligns their interests from those of shareholders.",
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      "text": "acquisitions. It is still clear that FMCN did not actually purchase six purported mobile handset advertising businesses, even as VIEs.",
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      "text": "FMCN's response that insiders' self-dealing was to show “confidence” in the businesses is almost ridiculous enough to not merit a mention in this report. FMCN's response cites a dubious valuation report as support for self-dealing in Allyes, yet FMCN does not provide answers as to why two outside individuals were allowed to earn $20 million on the transactions.",
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      "text": "II. FMCN's filings and MW's conversations with FMCN provide strong evidence that FMCN's response is double counting digital poster frames (although FMCN's response specifically states that it is not).",
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      "text": "FMCN's response stated that MW misunderstood the way that FMCN classifies its LCD displays, and that MW excluded 32,478 “LCD 2.0 digital picture screens” and 29,878 “LCD 1.0 picture frame devices” from our calculation of the size of its commercial location network; and, that including these digital frames, FMCN has 178,382 LCD displays in the network. FMCN stated that these frames are not included in its calculations of poster network size.",
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      "text": "3 http://www.sec.gov/Archives/edgar/data/1330017/000130901411000764/exhibit2.htm\n4 FMCN 2010 20-F, pp. 4-5.\n5 FMCN 2010 20-F, p. 40.",
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