Initiating Coverage on AMT – Strong Sell (Slide Deck)

July 17, 2013

Muddy Waters rates American Tower Corporation (NYSE: AMT) shares a Strong Sell. In this latest report Muddy Waters highlights how:

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We rate American Tower Corp. (NYSE: AMT) a Strong Sell and value it at $44.57 per share, representing downside of 40%. AMT has serious challenges domestically and internationally that have not been factored into the stock price. It has engaged in a value destroying investment binge overseas, and we have identified a significant material misstatement in the Company’s accounts that could amount to fraud.

There is an approximately US$250 million discrepancy between what AMT claims to have paid for the acquisition of towers in Brazil, and the actual selling price. AMT claimed to have paid US$585.4 million for the towers, but the real price was close to US$300 million. If AMT is aware of this discrepancy, it would amount to fraud. We have provided our research to the SEC.

CEO James Taiclet’s consistent sales of approximately 90% of the shares he receives from option exercises suggests a lack of faith in the sustainability of AMT’s business – ironically, this is a view we share with him.

AMT’s international business is in part a de facto lending business that artificially inflates revenue, EBITDA, and AFFO. It is also part carry trade and part levered directional currency bet. This bet has resoundingly gone south this year.

AMT’s international IRRs are generally poor and far below cost of capital.

While wireless data usage will grow, much of this growth will circumvent cellular towers. Wi-Fi and more recently introduced technologies are making towers the data delivery option of last resort.

AMT’s REIT-focused investors will be disappointed by their inability to access AMT’s overseas cash flows.

Wall Street is setting investors up for a fall in AMT. We have reviewed five analyst models, and it is clear that they do not understand the company or know how to model it.

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CCME: Irrefutable Evidence of Fraud

March 2, 2011

Muddy Waters, LLC has amassed irrefutable evidence that China MediaExpress Holdings, Inc. (“CCME”) is a substantial fraud, and that management is engaging in a cover-up replete with further dissemination of fraudulent information. In light of the nature of the evidence, we believe that a de-listing from NASDAQ is not improbable; further, we believe that management stands to lose additional credibility. We therefore reduce our estimated value by one-third to $3.54.

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We present a recorded telephone conversation that contains an admission that CCME is engaging in securities fraud. The conversation took place on February 23rd between the CCME salesperson who provided us with the advertiser kit we cited in our February 3, 2011 report (the “Report”) and one of our analysts. The CCME salesperson initiated the conversation without notice in response to investigative actions taken by CCME’s auditor, Deloitte Touche Tohmatsu (“Deloitte”). During the conversation, the salesperson stated that:

CCME has been doubling the number of buses on which it has installed equipment for purposes of its SEC filings; and

CCME replaced recently replaced the salesperson’s hard drive due to the increased scrutiny.

The video recording of the conversation with subtitles can be viewed below:

Please note that by viewing the video below, you are agreeing to our Terms of Service.

We document that in the course of rebutting our Report, Chairman Cheng provided fabricated information. In Chairman Cheng’s February 7, 2011 letter (the “Chairman’s Letter”), Chairman Cheng challenged our assertion that CCME’s largest purported contract does not exist. His proof includes an “excerpt” of buses he claims are covered by the disputed contract. The excerpt contains license plate numbers of three buses. We have official documentation (shown in Appendix A) from the Shanghai Public Security Bureau Traffic Management Administrator (the “Traffic Administrator”) that shows these three license plates numbers are fabricated.

We present the sales presentation we received in January from the aforementioned salesperson (the “Sales Presentation”) that shows CCME has fewer than half of the buses it claims. The Sales Presentation (Appendix B), which shows CCME’s buses by province and city, corroborates the following facts we presented in our earlier Report:

CCME has fewer than half of the buses it claims; and

its largest purported contract (with Shanghai Ba Shi for 1,892 buses) does not exist. The number of buses for Shanghai-based operators in the presentation matches the number in the spreadsheet we received – 296.

We present a mini-documentary of the largest purported operator – Shanghai Ba Shi – specifically focusing on its inter-city buses and drivers. The film shows that CCME’s hardware is not installed on the buses, despite CCME’s claim to have had hardware on these buses since at least mid-2008.

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Muddy Waters Initiating Coverage on DGW – Strong Sell

April 4, 2011

Muddy Waters LLC has initiated coverage on Duoyuan Global Water Inc. (DGW) with a Strong Sell rating and an estimated value of less than $1.00.

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We estimate DGW’s actual revenue is no greater than US$800,000 annually, versus the US$154.4 million it claims. Our estimate is based on DGW’s PRC audit report, which is highly reliable.

Muddy Waters caught DGW red handed forging its PRC audit report. DGW’s actions validate the audit report’s significance.

Our extensive surveillance of DGW’s factory confirms our revenue estimates.

We identified four errors in DGW’s US audit, which indicates the auditor was sloppy.

DGW has much in common with its troubled sister company, DYP. We believe these commonalities further DGW’s fraud.

DGW engages in improper undisclosed related party transactions that transfer money to its chairman.

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Muddy Waters Reaction to TRE Q1 2011 Conference Call

June 14, 2011

Muddy Waters LLC publishes their reaction to Sino Forest’s Q1 2011 conference call on June 14th, 2011.

TRE.TO, SNOFF.PK – The Ties that Blind – Part 1

June 20, 2011

In the Ties that Blind, Part 1, Muddy Waters, LLC addresses TRE’s attempt to distance itself from Huaihua Yuda. In reality, Huaihua Yuda appears to be closely related to TRE.

Open Letter to SPRD Chairman re: MW Concerns

June 28, 2011

Muddy Waters, LLC has begun researching Spreadtrum, Communications Inc. (NASDAQ: SPRD), and we have taken a short position in it. (Please see our disclaimer below.) We have identified a number of issues in SPRD’s filings, and we believe that there is a high risk of material misstatement in the reported financials. Our concerns are gravest regarding 2010 and 2011 numbers. The below link is to an open letter we have written to SPRD chairman Li regarding our concerns.

Muddy Waters Initiating Coverage on TRE.TO, OTC:SNOFF – Strong Sell

June 2, 2011

Muddy Waters LLC has initiated coverage on Sino-Forest Corporation (TRE.TO, OTC:SNOFF) with a Strong Sell rating and an estimated value of < $1.00.

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Like Madoff, TRE is one of the rare frauds that is committed by an established institution. In TRE’s case, its early start as an RTO fraud, luck, and deft navigation enabled it to grow into an institution whose “quality management” consistently delivered on earnings growth.

TRE, which was probably conceived as another short-lived Canadian-listed resources pump and dump, was aggressively committing fraud since its RTO in 1995.

The foundation of TRE’s fraud is its convoluted structure whereby it runs most of its revenues through “authorized intermediaries” (“AI”). AIs supposedly process TRE’s tax payments, which ensures that TRE leaves its auditors far less of a paper trail.

On the other side of its books, TRE massively exaggerates its assets. We present smoking gun evidence that TRE overstated its Yunnan timber investments by approximately $900 million.

TRE relies on Jakko Poyry to produce reports that give it legitimacy. TRE provides fraudulent data to Poyry, which produces reports that do nothing to ensure that TRE is legitimate.

TRE’s capital raising is a multi-billion dollar ponzi scheme, and accompanied by substantial theft.

Appendices will be available for download shortly.

There is an analyst-only conference call scheduled for a Monday, June 6th at 6:00 PM (EDT). This call is for analysts only. Please send us your information including name and firm to info@muddywatersresearch.com and we will send you a confirmation code.

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MW Reiterating Strong Sell on FMCN

November 29, 2011

NOTE: An earlier draft / discussion version of this report may have been inadvertently disseminated – this report is the only official version, and any content in an earlier version was for internal discussion purposes and should be disregarded in its entirety.

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FMCN’s partial response to our 80-page November 21, 2011 report reinforces our Strong Sell rating.

FMCN’s response admitted that our estimate of fewer than 120,000 LCD screens showing full motion video advertisements is correct. Despite this admission, FMCN denied that it was fraudulently overstating the number of displays in its network because the 178,382 displays it discloses include 62,656 digital picture frames. FMCN’s response stated that it does not also count these digital picture frames in its poster segment. There is strong evidence that FMCN does in fact double count these digital frames. However, in response to our report and in contrast to previous 20-F filings, FMCN has expanded the definition of its LCD commercial display network beyond full motion video, which makes a clear and final resolution of this point unlikely. Therefore, FMCN at best prompted investors to think it had more motion displays than it does, and at worst fraudulently overstated the size of its LCD commercial display network. Both possibilities raise concerns about the health of this business line.

FMCN has fraudulently overstated the size of at least one other business line – through 2008, FMCN claimed its movie theater network was 17.6x the size of the potential market.

FMCN’s response did nothing to dispel our concerns about its acquisitions – namely that it deliberately overpays for, and unduly impairs in order to improperly give away, a substantial portion of its acquisitions. It is still clear that FMCN did not actually purchase six purported mobile handset advertising businesses, even as VIEs.

FMCN’s response that insiders’ self-dealing was to show “confidence” in the businesses is almost ridiculous enough to not merit a mention in this report. FMCN’s response cites a dubious valuation report as support for self-dealing in Allyes, yet FMCN does not provide answers as to why two outside individuals were allowed to earn $20 million on the transactions.

We believe that FMCN’s impending “independent” verification of the number of LCD screens in its network is likely to be compromised. There is precedent for this statement – FMCN’s audit committee previously undertook a flawed investigation into possible improprieties. As we discussed in our initial report, FMCN’s board’s is comprised of individuals who are largely entangled with management and whose compensation misaligns their interests from those of shareholders.

We maintain our Strong Sell rating on FMCN mainly because our concerns regarding the viability of FMCN’s core LCD commercial location network remain. This issue, combined with FMCN’s additional misrepresentations about the size of the network, FMCN’s opaque business model (on both the revenue and cost sides), and insiders’ penchant for self-dealing, render FMCN shares un-investable.

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