Focus Media Shares Bounced Back: What You Need to Know

By Evan Niu - November 22, 2011 | Tickers: FMCN.DL | 0 Comments

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Following yesterday's crushing sell-off, shares of Focus Media (UNKNOWN: FMCN.DL) are bouncing back with a vengeance today, up by as much as 15%, as the company and some analysts have defended against fraud allegations made by Muddy Waters.

So what: The company denied the allegations completely, calling the assertion that it overstates the number of LCD advertising screens by roughly 50% as "unfounded" and misunderstood. Focus Media also defended its acquisition strategy, as Muddy Waters also alleged that Focus Media was deliberately overpaying to hide losses.

Now what: In a move to instill confidence in investors, the company also announced that it is reaffirming its intent to proceed with its previously authorized share repurchase program, of which $300 million remains available, and Focus Media Chairman Jason Jiang will purchase $11 million of American Depository Shares.

Amid the massive sell-off, Morgan Stanley analyst Richard Ji called it a "buying opportunity," calling previous acquisition writedowns old news, and reiterated his overweight rating with a $46.50 price target. Goldman Sachs analyst Catherine Leung also notes that the details surrounding material acquisitions have all been previously disclosed, and although she believes the company is cash flow positive, she has placed her buy rating under review as she awaits more official detail from the company. Focus Media has said it hopes to provide additional details from a third party report in roughly two weeks.

Interested in more info on Focus Media? Add it to your watchlist by clicking here.

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