Sina Hit on Muddy Waters Mix-Up

On Monday, Sina Corp SINA traded sharply lower after speculation circulated that the company could be the next target of noted short seller Muddy Waters. Earlier in the month, Muddy Waters released a report critical of Focus Media FMCN. That report sent the stock trading harshly lower and prompted a conference call by the company's management to address the concerns raised by Muddy Waters. Then, on Monday, Eric Jackson of Ironfire Capital published an article in the Chinese version of The Wall Street Journal. Perhaps due to the fact that it was written in Mandarin, the article appeared to have been misinterpreted by traders and the broader investment community. The general sentiment on the Street was that the article had alleged that Sina Corp was a possible target of Muddy Waters. Given Muddy Waters' track record, anyone holding Sina may have bailed out quickly so as to avoid the same fate experienced by those long Focus Media. Yet, Jackson's article stated nothing of the short. Benzinga contacted Jackson on Monday to get his intentions behind the writing of the article. According to Jackson, the intention of his piece was to point out that Muddy Waters may have shifted its focus away from reverse-mergers like Sino Forest (a target earlier in the summer) to more well connected companies like Focus Media. The mention of Sina Corp was simply to point out that the companies have ties on a management level—not to state that Muddy Waters was considering targeting the company with a negative report. Muddy Waters did its part to verify, tweeting that it had done "zero work" on Sina Corp and stating that it did not have plans to release a report on the company. After the market had fully digested the news, Sina Corp traded higher, and as of 11am was nearly unchanged on the session. Regardless, the case of the Sina Corp mix-up may only serve to demonstrate the power of Muddy Waters' reputation. A mere speculative mention in a foreign article can send a stock tumbling almost 10% within minutes.