July 20 (Bloomberg) -- New Oriental Education & Technology Group Inc. rallied for a second day after forming an independent committee to review allegations raised by short seller Muddy Waters LLC about the Chinese company’s accounting practices.
The American depositary receipts of New Oriental jumped 15 percent to $12.91 in New York, extending a two-day gain to 36 percent. The rebound followed a 35 percent slump on July 18 as Muddy Waters questioned the ownership of some of New Oriental’s schools and the consolidation of their financial statements with the parent company.
The Beijing-based educational services provider, known as EDU, said it formed a special committee comprised of three independent directors to conduct a review of the allegations. It aims “to provide the highest level of transparency to its shareholders,” according to its statement today.
“EDU provided a more detailed response and addressed additional allegations via a conference call last night,” Jeffrey Meuler, an analyst at Robert W Baird & Co., wrote in a note to clients today. “The management said they were not aware of the report until this Wednesday, and therefore EDU is still in the process of gathering and analyzing data.”
New Oriental, responding to Muddy Waters’s allegations in a statement yesterday, said it owned 664 schools and learning centers at the end of May as previously disclosed and that 21 third-party operated “cooperation facilities” and their students were never counted as the company’s.
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