Longview

What: Shares of Indian language film distributor Eros International (NYSE:EROS) surged on Thursday after the company released a press release defending its business model. The press release was in response to an article published on Seeking Alpha on November 10 accusing the company of vastly overstating its revenue. After rising as much as 18% Thursday morning, the stock was up about 6% at 1 PM.

So what: The aforementioned article accuses Eros of overstating its theatrical revenue by over 100% in fiscal 2015, as well as overstating the number of distributed movies by 200%. This article was the second from the same author during the past two weeks which raised questions about Eros' accounting.

In response, Eros denied any wrongdoing. "As part of the NYSE IPO process in November 2013, the Company's entire film library, and not just the new release slate tables, went through full due diligence in which each and every agreement was vetted. This same process was repeated for the follow-on equity offering in July 2014. Every year when the Company files its Form 20F, the Company and its auditors review the entire slate for that particular year. Further, the Company has never claimed to produce all the films it releases. The Company's disclosures clearly demonstrate that it co-produces or acquires films for distribution. All these filings are available on the SEC's EDGAR database as well as on the Company's website."

Now what: Shares of Eros have tumbled since August, falling about 75% in a just a few months. An earnings miss in August kicked off the decline, and most of the decline actually occurred before the wave of negative press.

EROS Chart

EROS data by YCharts

Eros' vigorous defense of its business has given a boost to the stock today, but only time will tell whether there's truth in any of the allegations brought against the company.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.