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What: Shares of Focus Media (Nasdaq: FMCN) plunged after its audit committee published the first of two studies regarding the number of screens showing its ads. Focus Media operates an outdoor digital advertising network in mainland China and Hong Kong.

So what: The report is an attempt to respond to fraud allegations published last month by short-seller Muddy Waters. At issue, the firm says, is a gross overstating of the number of television screens showing Focus Media ads. Muddy Waters also accuses the company of overpaying for acquisitions in order to mask losses.

Now what: Focus Media still expects another third-party report, but the initial findings -- that Focus Media's published network data is essentially correct -- throw cold water on Muddy Waters' assertions. You just wouldn't know it from the stock action. Do you believe the report? Would you buy shares of Focus Media at current prices? Let us know what you think using the comments box below.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.