Short Seller Prods Internal Accounting Probe Of Focus Media

Now, here’s a weird story. Focus Media Holding (FMCN), a Shanghai-based company that provides in-store flat-panel advertising displays, Monday announced that it will postpone its Form 20-F annual report with the SEC in order to investigate allegations of issues surrounding certain related party transactions that were raised by - get this - a short seller.

Specifically, the company said that on June 1, its audit committee received a letter from “U.S. counsel to an unidentified investor holding a short position in our shares.” The letter, “without indicating the source of the evidence,” raised “questions primarily on certain related party transactions we reported in 2005.”

On June 18, the company asked the sender for more information. On June 22, the company says, it received a second letter from the same source, “which reiterated the assertions made in the letter of June 1…without providing any source of evidence or identity of the short seller.”

Nonetheless, the company seems to be taking the charges seriously, whatever they are. The company said that its Audit Committee, “to comply with its fiduciary duty to shareholders,” has begun an internal inquiry into the issues raised in the letter. And until it has completed the investigation, it won’t be filing its annual report.

FMCN 1-yr chart:

Comments

[Chimin Sang:]

This is sort of equivalent to Steve Jobs backdating Apple options...

Related party transactions are quite common in China -- there is an OFFICIALLY accepted accounting item in China accounting system to accommodate gifts between related parties.

This short seller is very screwed up.

2007 Jul 03 12:26 PM

[suburban blues:]

Boo hoo hoo! A short seller shorted a stock that wouldn't go down (it was an idiot's choice to short FMCN). So now he tries to orchestrate a market event so he can cover his ass one way or another. I think the SEC should be looking very hard at this short seller and his sheister lawyer.

2007 Jul 04 01:28 PM