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What: Shares of Chinese digital advertising company Focus Media
So what: In a sign of just how skittish Chinese-stock investors are and how much credibility Muddy Waters has garnered, the research firm's just-released coverage on Focus Media has absolutely torpedoed the stock. Muddy Waters' report alleges that the company is significantly overstating the number of television screens in its advertising network and that it may have been deliberately overpaying for some acquisitions to mask losses.
Now what: Muddy Waters has recently been in the news after an interim report on the investigation into Sino-Forest -- which Muddy Waters also alleged to be a fraud -- said that it appears that the bookkeeping at Sino-Forest was in order. In other words, after a massive plunge in Sino-Forest's stock, which walloped many major investors including John Paulson, it looks like Muddy Waters could have whiffed there. But with the final report due later in the year, that's still to be determined.
That said, quite a few other companies on the wrong end of Muddy Waters research -- including Rino International, China MediaExpress, and Duoyuan Global Water -- have fallen and give no indication of getting back up.
Which group will Focus Media join? Unfortunately, that's a question that it may take some time to sort out.
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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.