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  "documentTitle": "New Oriental Education & Technology Group (EDU)",
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  "authorName": "Carson Block",
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  "presentationDate": "2012-07-18 00:00:00",
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  "notes": "Uses a quote from The Wire to frame the contradiction between the CFO's public statements and the reality of the franchise model.",
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      "text": "We rate EDU a Strong Sell because it is probable that EDU will have a significant restatement, and that its auditor will resign.",
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      "text": "It is virtually certain that EDU uses the upfront franchise and other fees to inflate its cash balances in order to receive unqualified audit opinions from its auditor.",
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      "text": "EDU’s Beijing operation (which is approximately 35% of EDU’s reported revenue) has prepared financial statements for 2009 – 2011 are fraudulent.",
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      "text": "EDU’s corporate structure is far more problematic than just a weak VIE. The schools that conduct its operations are ultimately state property.",
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      "text": "EDU has reported 392% revenue growth since going public. EDU tells investors that its entire store network is company-owned, but this is a lie. This report shows Hsieh’s statements are patently false – EDU has numerous franchisees.",
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      "text": "Q: \"Do you franchise any of your stores?\" Hsieh: \"No. No. Our biggest asset, the reason our moat is so large is cause of our brand name. We will protect that. [inaudible] We own everything.\" Q: \"So the four hundred and thirty learning centers...\" Hsieh: \"We own all of them.\"",
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      "text": "In the following excerpt of a June 2012 conversation, EDU president and CFO Louis Hsieh is either lying or demonstrating that he is being lied to. As we show in this report, it is indisputable that EDU has an extensive franchising operation.",
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      "text": "A lie ain't a side of a story. It's just a lie.",
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      "text": "“A lie ain’t a side of a story. It’s just a lie.” — The Wire, season 5 episode 8",
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      "text": "Calculation based on RMB revenue, and excludes currency fluctuations. Store count number includes schools and learning centers; it excludes book stores. Props to Shakespeare for the original line in Hamlet Act III, Scene II.",
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      "text": "Franchising: The CFO Doth Protest Too Much, Methinks",
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