Updated with share price rally in China MediaExpress.FUJIAN, China ( TheStreet) -- China MediaExpress ( CCME) denied a short-seller's allegations of fraud late Thursday, claiming the bearish report was strategically released on the Chinese New Year. Shares of China MediaExpress, which operates a television advertising network on buses in China and was created through a reverse merger, plunged 33% Thursday after California-based Muddy Waters Research accused the Chinese company 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." 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.
Earlier this week, Citron Research released a similarly bearish report on China MediaExpress, citing discrepancies in documents filed to China regulators and credit rating agencies as well as financial analysis. The firm argues that China MediaExpress does not exist at the scale it is reporting to the investing public. After Citron's negative report was released, China MediaExpress issued a press release saying it "strongly disagrees with the views expressed" and that investors should continue to rely on filings the company has made with the SEC. Other Chinese reverse mergers, including Rino International ( RINO.PK), Orient Paper ( ONP), China Green Agriculture ( CGA - Get Report) and China Education Alliance ( CEU) have been slammed by critics over similar claims that filings made in the U.S. contain questionable or misleading financial statements. In December, TheStreet reported that the Securities and Exchange Commission is focusing on stock promoters, investment bankers, auditors and law firms that have been active in recruiting Chinese companies to U.S. stock exchanges and raising capital for those companies by selling new shares. -- 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 http://twitter.com/RobTheStreet. >To submit a news tip, send an email to: firstname.lastname@example.org.