BOSTON (TheStreet) -- Focus Media( FMCN) shares plunged by more than half after short seller Muddy Waters Research alleged the Chinese interactive digital media company has hidden losses by overpaying for acquisitions.

In the 80-page research note on the company released Monday, Muddy Waters calls Focus Media "the


of China," a reference to the Japanese camera maker that was recently found to have concealed losses for two decades with takeover fees and accounting tricks.

Carson Block, director of research at Muddy Waters Research

"Like Olympus,

Focus Media is significantly and deliberately overpaying for acquisitions, writing down $1.1 billion out of $1.6 billion in acquisitions since 2005," Muddy Waters researchers wrote in their report. They allege that Focus Media's overpayments include fraudulently booking at least six mobile handset advertising acquisitions that the company never made, and that Focus Media has written at least 21 acquisitions down to zero before disposing of them for no consideration.

More troubling, Muddy Waters claims that Focus Media says it has acquired, written down and disposed of companies it never actually purchased. "Investors should be concerned about to where the cash actually moved in these transactions, and about the integrity of reported results," the research shop wrote.

Jing Lu, the investor relations contact for Focus Media, didn't immediately reply to an email requesting comment from the company.

Investors have already shown their concern, dumping shares of Focus Media as fast as they can. The stock is down $14.38, or 56.4%, to $11.12, having fallen as low as $8.79 earlier in Monday's trading session. More than 37 million shares have changed hands already today, well above the average trading volume of 3 million shares. Muddy Waters, in calling Focus Media a "strong sell," benefits from any decline in share price as it has a short position in Focus Media.

Although Muddy Waters alleges that Focus Media has been fraudulently overstating the number of LCD screens in its network by 50% -- a similar claim the short seller levied against

China MediaExpress

in February -- the research shop has had mixed results in its charges against Chinese companies.

The short seller has seen success with charges against Chinese reverse merger companies

Rino International


China MediaExpress

, and

Duoyuan Global Water

( DGW), all of which have been booted from the major U.S. exchanges.

On the other hand, committees for both

Orient Paper




, each called a "strong sell" by Muddy Waters, found no evidence of wrongdoing. Another target of Muddy Waters,

Spreadtrum Communications


, sustained a sharp selloff and has seen its stock rise more than 34% this year in the wake of Muddy Waters' accusations.

-- Written by Robert Holmes in Boston


>To contact the writer of this article, click here:

Robert Holmes


>To follow Robert Holmes on Twitter, go to


>To submit a news tip, send an email to:


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.