Muddy Waters LLC has initiated coverage on China MediaExpress Holdings, Inc. (CCME) with a Strong Sell rating and an estimated value of $5.28.

• Muddy Waters, LLC believes that CCME is 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.
• We estimate that CCME’s actual 2009 revenue was no more than $17 million (versus $95.9 million it reported).
• The data CCME provides to advertisers shows that it has fewer than half of the 27,200 buses it claims to have.
• The CTR reports that the Company uses to support its claims contain gross errors that we conclude are due to manipulation by the management.
• We estimate that over half of CCME’s network buses do not actually play CCME content. Rather, drivers play DVD movies that are often provided by passengers.
• We caught CCME’s management telling a particularly egregious lie — that its new website (www.switow.com) has entered into an agreement with Apple (or one of Apple’s) distributors. Neither is true.
• Similar to RINO, CCME is an obscure company in its industry. Media buyers who would have to know it if CCME were to be believed have never even heard the Company’s name before.
• CCME’s core audience is sub-Greyhound Bus demographic.