This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

China MediaExpress CEO Fires Back at Critics

FUJIAN, China (TheStreet) -- China MediaExpress (CCME) shares rallied today after Chief Executive Officer Zheng Cheng defended the Chinese company against what he said was an attack by short sellers.

Shares of China MediaExpress, which operates a television advertising network on buses in China and was created through a reverse merger, were climbing nearly 11% to $15.34 after Cheng wrote in a letter to shareholders that short sellers "timed and coordinated their efforts" in "reckless and baseless attacks" against the company. Short sellers make money from declines in share prices.

Last week, Muddy Waters Research accused China MediaExpress of "engaging in a massive 'pump-and-dump' scheme whereby it significantly inflates revenue and profits in order to enrich management through earn-outs and stock sales." Citron Research and Bronte Capital also released similarly bearish reports on China MediaExpress on Jan. 31 and Feb. 1, respectively.

Muddy Waters says it has a short position in the stock, and therefore stands to realize significant gains in the event that the price of stock declines.

Investigating Chinese Reverse Mergers

In his letter, Cheng categorically denied the allegations made in the three publications and lashed out at the alleged short sellers, arguing that a conflict of interest exists for short sellers that taints the objectivity and legitimacy of their research reports.

"By using the anonymity of the Internet and publicizing as many unfounded allegations as they can craft, they can make it look as if there is a ground swell of criticism against the company when in reality all the claims emerge from a small group of self-interested parties," Cheng wrote. "As long as they can drive down the stock price when the U.S. markets are open (even if there is a holiday in China) and then cover their short position cheaply and quickly, they have accomplished their goal."

Muddy Waters released its critical report on China MediaExpress on the Chinese New Year, when most Chinese businesses are closed to observe the holiday. Both the Hang Seng and Shanghai Composite were closed for trading when the research note was released.

Among several accusations made by Muddy Waters, the short-seller claims that China MediaExpress actually has fewer than half of the 27,200 buses it claims, citing data the company provides to advertisers. In addition, the firm alleges that China MediaExpress' management was lying when it announced that it had created an online-shopping platform that has an agreement with Apple (AAPL) or one of Apple's distributors.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs