{ "docId": "019dd923-622c-750b-8b96-0d980fa2623b", "docSlug": "1cadb87c03b4", "documentTitle": "Focus Media Holding Ltd. (FMCN)", "authorId": "51_Muddy_Waters", "authorName": "Muddy Waters", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2013-01-24 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 3, "pageCount": 3, "prevPage": 2, "nextPage": null, "slideType": "preempt_rebuttal", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 18, "notes": "The slide uses investigative research to link multiple entities to a single registered agent, suggesting a pattern of fraudulent activity.", "elementsJson": [ "paragraph", "data_table", "footnote" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b96-0d980fa2623b/3", "deckHref": "/decks/019dd923-622c-750b-8b96-0d980fa2623b", "deckJsonHref": "/decks/019dd923-622c-750b-8b96-0d980fa2623b.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-0d980fa2623b#slide-3", "components": [ { "bbox": null, "kind": "callout", "text": "For the record, we believe that Carlyle and the other sponsors' investors will experience a significant loss on the FMCN transaction if consummated.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-ee39-730e-b026-87673c828179", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.04, "w": 0.72, "x": 0.14, "y": 0.37 }, "kind": "paragraph", "text": "Including Hempton's research, that is now eight transactions that FMCN did with purportedly unrelated sellers in which Overseas Management registered the BVI companies.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "453a4632-ed71-472d-8664-cc5a8275eb0d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.09 }, "kind": "paragraph", "text": "Picking up the ball from Hempton, we pulled the registration records of the other five purported BVI holding companies for the mobile phone companies. These acquisitions are also all supposed to be from unrelated sellers. However, four of the five companies were also registered by Overseas Management. The complete results are in the table below:", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "65979be9-3c2f-4390-902e-764d98897942", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.72, "x": 0.14, "y": 0.55 }, "kind": "paragraph", "text": "We have been asked repeatedly to comment on the LBO and have not done so until now. For the record, we believe that Carlyle and the other sponsors' investors will experience a significant loss on the FMCN transaction if consummated. Why would the transaction proceed in light of all of the issues? Carlyle has certainly had its problems in China, including China Agritech Inc. (OTC: CAGC) and China Forestry Holdings Inc. (0930.HK). In any event, some things cannot be explained – many asked the same question of HP's acquisition of Autonomy.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8f528719-a3f4-4534-b90b-3724b53ff651", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.72, "x": 0.14, "y": 0.42 }, "kind": "paragraph", "text": "It should be obvious from the body of research MW, Hempton, and others have put forth that FMCN has been committing fraud for a long time. This includes FMCN's extremely reluctant confirmation that it substantially overstated the size of its LCD network. FMCN recently disclosed that on March 14, 2012, the SEC informed it that the SEC was investigating the Company for possible securities law violations. Yet, Carlyle is leading a private equity consortium to buy FMCN. The equity sponsors will borrow a significant amount of money to buy the company.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f5b33946-45bf-4969-9f4e-b22ed3faa2ef", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "FMCN vehemently denied our allegation at first, and even hired two firms to “verify” the size of its LCD network. FMCN eventually conceded that it was counting in excess of 30,500 cardboard posters in order to meet its LCD count — Muddy Waters.", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-ee39-730e-b026-8a1bb07c3691", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.85 }, "kind": "source-note", "text": "4 FMCN vehemently denied our allegation at first, and even hired two firms to “verify” the size of its LCD network. FMCN eventually conceded that it was counting in excess of 30,500 cardboard posters in order to meet its LCD count – see our Feb. 9, 2012 report on FMCN.\n5 SC 13E3 filed on 1/18/12, p. 58.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c690276d-df08-4625-892d-f2e85f5971a1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.72, "x": 0.14, "y": 0.17 }, "kind": "table", "text": "Mobile Phone Ad Company | Purported BVI Holding Company | Registered Agent\nDongguan Yaya | Directvantage Ltd. (registered four months after purported acquisition) | Overseas Mgmt Co.\nGuangzhou Xuanwu | Summitworld Ltd. | Overseas Mgmt Co.\nShenzhen Julan | Surge Zhenghe Holding Ltd. | Trident Trust Co.\nShenzhen Mengwang | Speedaccess Ltd. | Overseas Mgmt Co.\nBeijing Shiji Zhongkai | Profitbest Worldwide Ltd. | Overseas Mgmt Co.\nShenzhen Jingzhun | Newking Investment Ltd. | Overseas Mgmt Co.", "attrs": null, "subkind": "data", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "eda08f3f-3a1a-4a6f-bb61-18a5dfb36327", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "9f0aa560-e2a8-4d64-b26a-235b576b17e9", "evidence": "The slide explicitly details a pattern of suspicious BVI registrations and SEC investigations to argue for fraudulent activity.", "confidence": 0.9 } ], "arcBeats": [ { "to": 3, "from": 3, "beatId": "7106bdbb-5ef8-4bba-91f6-a44a65702920", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Evidence", "beatSlug": "evidence", "evidence": "The preempt rebuttal on page 3 provides evidence to support the claim that FMCN is lying", "position": 2, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [ { "to": 3, "from": 2, "name": "Aha Moment", "slug": "03-aha-moment", "bestFor": "Data-heavy sections, research findings, analytical arguments", "matchId": "8933cb39-c134-439a-ac8d-88e106f9126a", "evidence": "The research note provides a clear aha moment by revealing the inconsistency in registration records", "position": 0, "objective": "To reveal the inconsistency in FMCN's registration records", "structure": "The Problem/Question -> What the Data Shows -> The Insight", "confidence": 0.7, "description": "Establish a tension, present data, then deliver the insight that changes everything" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }