Muddy Waters strikes again!
Got this today.
FMCN: MW was Right that FMCN Lied re LCD Network; "Verification" Counted 30,500 Cardboard Posters
In our November 21, 2011 report on FMCN, we accused management of fraudulently overstating the size of its LCD Network. FMCN had previously defined the LCD Network as a “network of flat-panel television displays.” FMCN first vehemently denied our charges that it overstated the LCD Network size, and then independently “verified” that its previously reported number of 185,174 LCD Network displays was correct.
However, over 30,500 of those “verified” displays are not LCD televisions at all – rather, they are mere cardboard posters. Not only does this mean that FMCN management was brazenly lying to investors in the wake of our report, but the lies sharply call into question the veracity of FMCN’s reported financials. We estimate that each LCD television generates monthly revenue seven times that of a cardboard poster.
Separately, on November 29, 2011 we pointed out that FMCN had previously grossly lied about the size of its movie theater advertising network. FMCN’s recent attempt to explain away that lie is almost as ridiculous as its conflation of cardboard with LCDs.
The implication for investors is that if the inputs to the financials (network sizes) are lies, then why wouldn’t the outputs (revenue and profit) also be lies? As the old saying goes, “garbage in, garbage out.”
To download the complete report (in PDF format), go to
www.muddywatersresearch.com/wp-content/uploads/2012/02/MW_FMCN_Cardboard LCD.pdf
