NEW YORK ( TheStreet) -- Orient Paper ( ONP) shares rallied Friday, retracing most of the week's 50% drop, as long and short investors battled over the legitimacy of the company's financial position and operational viability.Orient Paper shares were sliced nearly in half during the first four trading sessions of this week, pressured by a bearish report from Muddy Waters Research, whose principals are short the stock and would benefit by a decline in its price. Two investors with long positions in the stock -- Rick Pearson and Eric Jackson -- came to Orient Paper's defense, contending that Muddy Waters' research was ill-grounded. Pearson and Jackson are both independent investors who contribute commentary to TheStreet. In the firm's inaugural research note, Muddy Waters asserts that Orient Paper is a "fraud" and that it "overstated its 2008 revenue by 27 times." The firm cited financial statements by He Bei Oriental Paper Co. Ltd, which it claims is an operating subsidiary of Orient Paper. Muddy Waters alleges that most of the $31.5 million that Orient Paper raised between October 2009 and May 2010 "has been misappropriated."