Focus Media Holder Fosun Boosts Stake After Muddy Waters Report

Focus Media Holding Ltd. (FMCN)’s biggest investor purchased more of the stock after a decline triggered by a Muddy Waters LLC report that alleged the Chinese company had overstated its outdoor advertising assets.

Fosun International Ltd. (656) bought 602,687 American depositary receipts of Focus Media for $10.4 million Nov. 22, the Hong Kong-listed company said in a statement to the city’s stock exchange yesterday. Fosun’s stake in Shanghai-based Focus Media rose to 16.42 percent, according to the statement.

Muddy Waters, controlled by short seller Carson Block, said in a Nov. 21 report that Focus Media overstated the number of television screens in its advertising network by about 50 percent and may have overpaid for takeovers to mask losses. Focus Media slumped 39 percent in U.S. trading that day, before rebounding Nov. 22 as the company denied the allegations and said the report reflects a misunderstanding of its business.

Fosun “is confident in the management team and the development of Focus Media,” according to yesterday’s statement.

Block didn’t immediately reply to an e-mail yesterday seeking comment.

Focus Media said Nov. 22 it will recommend the board hire an outside firm to examine the size of its advertising network. The results of that review should be ready in two weeks, the outdoor-advertising company said.

Fosun fell 1.2 percent to HK$4.11 in Hong Kong yesterday, the lowest since Oct. 26. The announcement came after the close of trading. The stock has declined 15 percent this week, compared with a 3.4 percent drop in the city’s benchmark Hang Seng Index.

Sino-Forest Corp. (TRE), a Chinese timber producer, slumped 74 percent between June and August after Muddy Waters said in June that the Toronto-traded company overstated the value of its assets.

To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; Billy Chan in Hong Kong at bchan101@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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Nov. 23 (Bloomberg) -- Jiong Shao, head of Hong Kong and China research at Macquarie Group Ltd., talks about Focus Media Holding Ltd. Focus Media denied assertions from short seller Carson Block, saying a report that drove the shares down 39 percent yesterday reflects a misunderstanding of the company’s business. Shao speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)