Muddy Waters posted a new report today on New Oriental Education. The report sent the stock down 35% today. The company, which operates schools in China, was part of a wave of companies who did business primarily in that country but sold shares in the United States to attract new sources of capital. The report states that New Oriental is lying about the nature of its franchising operations, arguing that the company’s chief executive has denied the existing of what the report says is an extensive business.
In the report they accuse New Oriental of using fees from its franchises to inflate the cash levels on its balance sheet, thereby persuading its auditors to give it a clean bill of health. They arent the first firm to accuse New Oriental of fraud, OLP Global, has accused the company of fraud as well.
Muddy Waters Report on New Oriental Education & Technology Group